UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

or

Commission file number: 000-22920

NUMEREX CORP.

(Exact name of registrant as specified in its charter)

3330 Cumberland Parkway, Suite 700

Atlanta, GA 30339-2119

(Address of principal executive offices) (Zip Code)

(770) 693-5950

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.                                                                                                                                                                         files).

Yes þNo¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨     No þ

As of NovemberMay 3, 2015,19,254,7062016, 19,437,322 shares of the registrant's Class A common stock, no par value (being the registrant's only class of common stock outstanding) were outstanding.

NUMEREX CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

NUMEREX CORP. AND SUBSIDIARIES

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOMELOSS

(In thousands, except per share data)

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'SHAREHOLDERS’ EQUITY

(in thousands)

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS — CONTINUED

(In thousands)

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015MARCH 31, 2016

NOTE A – NATURESUMMARY OF OPERATIONS AND BASIS OF PRESENTATIONSIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Numerex Corp. (NASDAQ: NMRX) is a holding company and, through its subsidiaries, is a single source, leading provider of managed machine-to-machine (M2M) enterprise solutions enabling the Internet of Things (IoT). The Company provides itsAn 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 servicesservice solutions through itsour integrated M2MIoT horizontal platforms, which are generally sold on a subscription basis. The Company offers Numerex DNA® that may include hardware and smart Devices, cellular and satellite Network services, and software applications thatWe are delivered through our M2M platform. The Company also provides business services to enable the development of efficient, reliable, and secure solutions while accelerating deployment. Numerex is ISO 27001 information security-certified, highlighting the Company’sour focus on M2MIoT data security, service reliability and around-the-clock support of itsour customers’ M2MIoT solutions. Foreign operations were not significant to us for the three months ended March 31, 2016 or 2015.

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 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, 2015March 31, 2016 and our operating results and cash flows for the interim periods presented. The accompanying condensed consolidated balance sheet as of December 31, 20142015 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, 20142015 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 and nine months ended September 30, 2015,March 31, 2016 may not be indicative of the results that may be expected for the year ending December 31, 20152016 or any future periods.

NOTE B – MERGERRestricted Cash

On May 5, 2014,As of March 31, 2016, cash of $0.2 million was held in accordance with the terms and conditions of the merger agreement, we merged our wholly-owned subsidiary with and into Omnilink Systems Inc. (Omnilink) with Omnilink surviving the mergerescrow related to certain vendor obligations as a wholly-owned subsidiaryresult of Numerex. The purchase price of $37.5 millionentering into our new loan agreement. See Note E – Debt. There was composed of ano restricted cash payment of $37.3 million and a working capital adjustment of $0.2 million.at December 31, 2015.

Omnilink provides tracking and monitoring services for people and valuable assets via Omnilink’s M2M platform that connects hardware, networks, software, and support services. Our combination with Omnilink has provided operating synergies and created growth opportunities through product enhancement and channel expansion. The assets, liabilities and operating results of Omnilink are included in our condensed consolidated financial statements commencing from the merger date.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015MARCH 31, 2016

The following table summarizes the fair valuesReclassifications

As a result of the assets acquired and liabilities assumedadoption of a recent accounting pronouncement, see Note G – Recent Accounting Pronouncements, the balance sheet as of December 31, 2015 reflects the closing date of the Omnilink mergerfollowing reclassifications (dollars in thousands):

 ________________

The total purchase consideration for the merger was allocated to identifiable assets purchased and liabilities assumed based on fair value. The estimated fair value attributed to intangible assets, other than goodwill, was based on common valuation techniques. The fair value of acquired software was estimated using a cost approach based on assumptions of our historical software development costs. The fair value of trade names was based on an income approach with key assumptions including estimated royalty rates to license the trade names from a third party. The valuation of customer relationships utilized an income approach and discounted cash flows taking into consideration the number of customer relationships acquired and estimated customer turnover.

The gross amount of accounts receivable in the table above is $2.9 million. Based on the nature and financial strength of the customers on the date of acquisition, we expected to collect amounts due for the accounts receivable of $2.7 million.

The value of the deferred tax asset and goodwill as disclosed above reflect a subsequent measurement period adjustment of $0.2 million recorded during the three months ended June 30, 2015 to record the final calculation of acquired deferred tax assets. The residual allocation to goodwill results from such factors as an assembled workforce, expected significant synergies for market growth and profitability as well as Omnilink’s service and product lines contributing to our becoming the market leader in select M2M vertical markets. The total amount of goodwill will not be deductible for income tax purposes.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

The measurement period adjustment resulted in recasting the December 31, 2014 consolidated balance sheet, as follows (in thousands):

The measurement period adjustment had no effect on the statements of operations and comprehensive (loss) income or cash flows.

NOTE C -B – INVENTORY

Inventory consisted of the following as of the dates below (in thousands):

In September 2015, we entered into new and amended agreements with wireless carriers that make adding 2G devices to wireless networks financially unfavorable under most circumstances. As a result of these agreements, we performed a lower of cost or market analysis leading to a significant increase in the inventory reserve of $1.1 million related to older, second generation (2G) cellular telecommunication devices and older satellite devices as well as an accrual for a purchase commitment related to raw materials for the older satellite devices that we will not fulfill.

NOTE D – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

Monitoring equipment includes devices and hardware owned by us and used by customers under managed service arrangements. Depreciation expense for monitoring equipment included in cost of sales for subscription and support revenues in the accompanying condensed consolidated statements of operations and comprehensive (loss) income was $0.3 million and $0.2 million for the three months ended September 30, 2015 and 2014, respectively, and $0.8 million and $0.4 million for the nine months ended September 30, 2015 and 2014, respectively.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

During the three and nine months ended September 30, 2015, we recognized additional depreciation expense of $0.4 million for managed service devices and hardware used by a financially troubled customer.

NOTE EC – INTANGIBLE ASSETS

Intangible Assets Other Than Goodwill

Intangible assets other than goodwill are summarized as follows (dollars in thousands):

Remaining useful lives in the preceding table were calculated on a weighted average basis as of September 30, 2015. March 31, 2016.We did not incur significant costs to renew or extend the term of acquired intangible assets during the three or nine months ending September 30, 2015.March 31, 2016.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

Amortization expense related to intangible assets was $1.3 million and $3.8$1.2 million for the three and nine months ended September 30,March 31, 2016 and 2015, compared to $1.2 million and $3.4 million and for the respective periods in 2014.respectively. Amortization expense recorded in cost of subscription revenues in the accompanying unaudited condensed consolidated statements of operations and comprehensive (loss) incomeloss was $0.3 million and $0.8$0.2 million for the three and nine months ended September 30,March 31, 2016 and 2015, and $0.2 million and $0.4 million for the three and nine months ended September 30, 2014.respectively. Additionally, we have capitalized approximately $0.6$0.3 million and $1.8$0.4 million of internally generated software development costs for the three and nine months ended September 30,March 31, 2016 and 2015 respectively and $0.6 million and $1.6 million for the three and nine months ended September 30, 2014, respectively.

Impairment of Goodwill and Patents and Trademarks

Our Do-It-Yourself (DIY) product line and reporting unit is not generating results of operations consistent with our expectations and previous forecasts and management is evaluating different strategic options for the reporting unit. These factors were triggering events that it was more likely than not that the fair value of the DIY reporting unit was less than its carrying amount. As a result, we performed our initial assessment of Goodwill for impairment of the DIY reporting unit, along with other intangible assets of the reporting unit, in the period ending September 30, 2015. The DIY reporting unit included $2.6 million in recorded goodwill and $0.6 million carrying value of patents along with an additional $1.3 million in other intangible assets.

We estimated the fair value of the reporting unit using a combination of market and income approaches and concluded that the estimated fair value of the reporting unit was less than its carrying value. We assessed the implied fair value of goodwill in the same manner as if we were acquiring the reporting unit in a business combination. Specifically, we allocated the estimated fair value of the reporting unit to all of the assets and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation, referred to as Step 2. We assessed the amortizing long-lived assets for impairment based on undiscounted cash flows and concluded that the carrying value of patents may not be recoverable. As a result, the fair value of patents was estimated using an income approach.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

Based on preliminary Step 2 calculations, we have recorded impairments of $0.9 million for goodwill and $0.3 million for patents during the period ending September 30, 2015. The amount of the impairments is an estimate that has not been finalized prior to filing this quarterly report. We expect to finalize Step 2 of the goodwill analysis and finalize the impairment of patents during the quarter ended December 31, 2015.

Activity for the carrying amount of goodwill for the nine months ended September 30, 2015 is summarized as follows (in thousands):

The January 1, 2015 goodwill balance of $44,348 reflects a final measurement period adjustment of $0.2 million related to deferred tax assets. See Note B – Merger.

NOTE F – OTHER ASSETS

Other noncurrent assets consisted of the following (in thousands):

During 2011, we purchased and installed telecommunication infrastructure equipment and related equipment to improve the capacity and functionality of our devices operating on one of our carrier networks. To comply with the needs of one of our carriers and in exchange for more favorable carrier fees, we transferred the legal right to the equipment to the vendor. Thus, our existing agreement with this vendor was amended to provide for the new carrier fees and the legal transfer of the equipment. We accounted for this transaction as a non-monetary exchange. The $2.2 million cost of the equipment was determined to be its fair value and we recorded this transaction by transferring the equipment cost to prepaid carrier fees. During 2014, we made a prepayment of $0.4 million to the same carrier to license additional network access. Both prepaid expenses were being amortized in cost of sales for subscription and support revenue on a straight-line basis over the term of the agreement, which was to expire in 2021.

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

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

NOTE GD – 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 that will be separately reported or reported net of their related tax effect 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.

At September 30,During 2015, we determined that we would not meet the criteria of “more likely than not” that the cumulative federal net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our cumulative loss over the past three years. Accordingly, we recorded a valuation allowance against these items. The deferred tax assets consist of federal net operating losses, state net operating losses, tax credits, and other deferred tax assets, most of which expire between 20152016 and 2035.2036. We will maintain the valuation allowance against the net deferred tax assets until sufficient positive evidence outweighs any negative evidence to support reversal. Future reversals or increases to the valuation allowance could have a significant impact on our future earnings.

As a result of recording a valuation allowance as of September 30, 2015, we recognizedWe recorded deferred income tax expense of $10.4less than $0.1 million, representing an effective tax rate of (174.1%(2.8%), for the three months ended September 30, 2015 and deferred tax expense of $10.1 million, representing anMarch 31, 2016. The difference in the effective tax rate of (154.6%),compared to the federal statutory rate, and the reason we recorded deferred income tax expense while generating a net loss before income taxes, are due primarily to the book and tax basis and accounting differences for the nine months ended September 30, 2015. The remaining difference of $0.3 million incertain long and indefinite lived intangible assets. We have also recognized a provision for income tax expense for the three months ended September 30, 2015 is primarily reversing the previous year-to-date benefit. For the nine months ended September 30, 2015, the remaining difference of $0.1 million in income tax expense is forcertain 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.

For the three and nine months ended September 30, 2014,March 31, 2015, we recorded income tax expense from continuing operationsbenefit of $0.4 million and $0.3 million, respectively, representing an effective tax ratesrate of 57.6% and 14.7%, respectively. Our income38.4%. The effective tax expense of $0.4 millionrate for the three months ended September 30, 2014 included a year-to-date adjustment of $0.2 million or 31.3% of the quarter’s pre-tax income, to increase our tax provision for the six months ended June 30, 2014 to the estimated annual effective tax rate. Our effective tax rates for the three and nine months ended September 30, 2014March 31, 2015 differed from the federal statutory rate applied to income and losses before income taxes primarily as a result of a number of discrete items, including (1) the effect of expenses that are not deductible for income tax purposes, including a portion of transaction costs incurred in the Omnilink merger and (2) state income taxes, including the tax effect of changes in effective state income tax rates, resulting from the merger with Omnilink. In addition, the effective tax rate for the nine months ended September 30, 2014, was reduced for the income taxand (3) a partially offsetting benefit from the capital loss on the disposaldisqualifying dispositions of BNI due to the ability to offset capital gains in our current tax year and to carry back for capital gains in prior tax years.incentive stock options.

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2012 through 20142015 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from years in which net operating losses have arisen are still open for examination by the tax authorities.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015MARCH 31, 2016

NOTE HE – DEBT

Debt consisted of the following (dollarsas of the dates below(dollars in thousands):

On May 5, 2014,March 9, 2016, we and certain of our wholly-owned, consolidated subsidiaries entered into a Second Amendednew term loan agreement with Crystal Financial LLC as Term Agent, and Restatedthe term lenders party thereto (the “Crystal Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank in orderpursuant to among other things, establishwhich the term lenders made a term loan to us in the amount of $25.0 million and a revolving line of credit of up to $5.0 million (collectively, the “Credit Facility”). As of September 30, 2015,we had no outstanding balance on the revolving line of credit.$17.0 million. The net proceeds from the term loan (after payment of the fees and expenses of the Term Agent), along with $2.9 million of cash on hand, were used to financerepay the Omnilink merger. See Note B –– Merger.$19.4 million outstanding debt under the Silicon Valley Bank (SVB) Loan Agreement and pay related transaction fees. We recorded a charge of $0.3 million to loss on extinguishment of debt for unamortized deferred financing costs related to the SVB Loan Agreement during the three months ended March 31, 2016.

The maturity date of the term loan is May 5, 2019 withMarch 9, 2020. We are required to make regular required quarterly principal payments which began June 30, 2014. The scheduled outstanding principalof $637,500 beginning September 1, 2017 with the balance of $5.0 million will be due aton the maturity date, if not otherwise repaid earlier by way of voluntary Permitted Prepaymentsprepayments, or by mandatoryupon the occurrence of certain Prepayment Events or Excess Cash Flow Recapture Payments (as defined in the Crystal Loan Agreement)., or as a result of acceleration of the loan as a result of an event of default. Prepayments of the loan are subject to a prepayment penalty of 3% of the amount prepaid if prepayment occurs prior to the first anniversary of the closing date and 2% of the amount prepaid if the prepayment occurs on or after the first anniversary of the closing date but prior to the second anniversary date of the closing date. There is no prepayment penalty for prepayments that occur on or after the second anniversary of the closing date. The interest rate applicable to amounts drawn pursuant topayable on the Loan Agreementoutstanding loan amount is currently 2.75% and is, at our option, determined by reference to the prime rate or LIBOR rate plus a margin established in the Loan Agreement.agreement. At March 31, 2016, the applicable interest rate was 9.1%.

Our obligations under the Credit FacilityCrystal Loan Agreement are secured by a first priority security interest in substantially all of our assets and the assets of our subsidiaries. In addition, we are required to meet certain financial and other restrictive covenants customary with this type of facility, including maintaining a senior leverage ratio, a fixed charge coverage ratiominimum Adjusted EBITDA, minimum Consolidated Fixed Charge Coverage Ratio, maximum Consolidated Total Net Leverage, maximum subscriber Churn, and minimum liquidity availability.Liquidity, all of which are defined in the Crystal Loan Agreement. We are also prohibited from entering into any debt agreements senior toincurring indebtedness, disposing of or permitting liens on our assets and making restricted payments, including cash dividends on shares of our common stock, except as expressly permitted under the Credit Facility and paying dividends.Crystal Loan Agreement. The Amended Loan Agreementagreement 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 Credit Facilityagreement may be accelerated.

As of September 30, 2015,March 31, 2016, we did not meet the fixed charge coverage ratio covenant. We entered into the first amendment to the Loan Agreement on November 3, 2015 (the “Amendment”). The Amendment does not permit any subsequent advances under the Credit Facility, waived the fixed charge coverage ratio for the three months ended September 30, 2015 and added a monthly liquidity ratio covenant. As a result of the waiver and our expectation of maintainingwere in compliance with all of the covenants in the future, we have continued to record scheduled principal payments due after twelve months as noncurrent.

In connection with our acquisition of a small technology business in October 2012, we entered into a Promissory Note of $1.9 million payable to the sellers of the business. The Promissory Note was paid in full as of September 30, 2015.covenants.

NOTE IF – NET (LOSS) EARNINGSLOSS PER SHARE

Basic (loss) earningsnet loss per share is computed by dividing net (loss) income availableattributable to common shareholders byis based on the weighted averageweighted-average number of common shares outstanding during the period excluding the dilutive impact of common stock equivalents. Diluted earningsnet loss per share includeis not presented separately because there are no adjustments to the effect ofnumerator in calculating dilutive net loss per share and all potentially dilutive securities on earnings per share. Thecommon stock equivalents would be antidilutive. Potentially dilutive effectcommon stock equivalents included 1.8 million shares as of both March 31, 2016 and 2015 for outstanding equity-based compensation awards is computed using the treasury stock method. The computation of diluted earnings per share does not assume exercise of securities that would have an anti-dilutive effect on earnings.

compensation.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015MARCH 31, 2016

The following table presents a reconciliation of the shares used in the calculation of basic and diluted net (loss) income per share from continuing operations contained in our condensed consolidated statements of operations and comprehensive (loss) income (in thousands):

NOTE JG – RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

In SeptemberMarch 2015, the Financial Accounting Standards Board (FASB) issued an accounting standards updateguidance about simplifying the presentation of deferred financing costs. The guidance was intended to help clarify deferred financing costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for deferred financing costs were not affected. The guidance was effective January 1, 2016 and, in accordance with the guidance,$1.0 million of deferred financing costs is included in long-term debt as of March 31, 2016 and $0.4 million of deferred financing costs was reclassified from current and noncurrent other assets to the current and noncurrent portions long-term debt as of December 31, 2015.

In September 2015, the FASB issued guidance to simplify the accounting for measurement-period adjustments for an acquirer in a business combination. The update will requirerequires an acquirer to recognize any adjustments to provisional amounts of the initial accounting for a business combination with a corresponding adjustment to goodwill in the reporting period in which the adjustments are determined in the measurement period, as opposed to revising prior periods presented in financial statements. Thus, an acquirer shall adjust its financial statements as needed, including recognizing in its current-period earnings the full effect of changes in depreciation, amortization, or other income effects, by line item, if any, as a result of the change to the provisional amounts calculated as if the accounting had been completed at the acquisition date. This update was effective January 1, 2016 and the adoption of this guidance did not have a material impact on our financial statements.

Recently Issued Accounting Guidance

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payments transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for fiscal yearsannual and interim periods beginning after December 31, 2016. Early adoption is permitted for any entity in any interim or annual period. We are currently evaluating the effect that the updated standard will have on our financial statements, but expect the guidance will add modest volatility in our equity-based compensation expense, provision for income taxes, and net income (loss).

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 31, 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 November 2015, the FASB issued guidance requiring all deferred tax assets and liabilities to be classified as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts. In addition, valuation allowance allocations between current and non-current deferred tax assets are no longer required because those allowances also will be classified as non-current. This standard is effective for public companies for annual periods beginning after December 15, 2015, and interim periods within those fiscal years.2016. We do not expect the adoption of this guidance to have a material impact on our financial statements.

In July 2015,the FASB issued guidance intended to simplify the presentation of applicable inventory at the lower of cost or net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The new guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We do not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

In March 2015, the FASB issued guidance about simplifying the presentation of debt issuance costs. The guidance is intended to help clarify debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. We do not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

In August 2014, the FASB issued guidance about disclosing an entity’s ability to continue as a going concern. The guidance is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter, with early application permitted. We do not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

In June 2014, the FASB issued guidance that applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. It requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition and follows existing accounting guidance for the treatment of performance conditions. The standard will be effective for us prospectively for fiscal years, and interim reporting periods within those years, beginning January 1, 2016, with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015MARCH 31, 2016

In May 2014, the FASB issued new accounting guidance for revenue recognized from contracts with customers. The core principle of the guidance is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance was set towill become effective for us for fiscal years, and interim reporting periods within those years, beginning January 1, 20172018 and will require retrospective application when adopted.On July 9, 2015,application. We are evaluating the FASB voted to defereffect that this amendment will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoptioneffect of the standard but not before the original effective date of December 15, 2016. We are currently evaluating how the adoption of this standard will impacton our Consolidated Financial Statements.ongoing financial reporting. 

NOTE KH – COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTSEVENT

On October 8, 2015,In March 2016, we closed onentered into a mutual agreement withcommitment for a vendor to (1) cancel the existing agreement, (2) purchase certain60 month lease arrangement for computer and network equipment, from the vendorsoftware and (3) assume certain nationalcarrier and other agreements from the vendor in exchange for $0.5 million in cash and 30,000 shares of our common stockrelated costs having a value of $0.3$1.2 million. See Note F – Other Assets.

On November 3, 2015, we entered intoThe lease commenced in April 2016 and will be accounted for as a capital lease, reflecting the first amendment tocorresponding assets and related obligations in the Loan Agreement. See Note H – Debt.

subsequent balance sheet.

Forward Looking Statements

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

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

Overview

As used herein, except as otherwise indicated by context, references to “we,” “us,” “our,” the “Company” or “Numerex” refers to Numerex Corp. and subsidiaries.

The following Management’s Discussion and Analysis is intended to help the reader understand our results of operations and financial condition. This discussion and analysis is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q for the period ended September 30, 2015.March 31, 2016.

We are a holding company that, actingand, through our subsidiaries, are a single source, leading provider of managed enterprise solutions enabling the Internet of Things (IoT). We empower enterprise operations with world-class, managed IoT solutions that are simple, innovative, scalable and secure. An IoT solution is onegenerally viewed as a combination of devices, software and services that operate with little or no human interaction. Our solutions incorporate each of the leading providers of managed M2M enterprise solutions with a presence predominately in North America. We incorporate thefour key M2M elements ofIoT building blocks – Device, (D), Network, (N),Application and Application (A), to create packaged and custom designed M2M solutions for the enterprise and government markets nationwide. We refer to this combination as Numerex DNA.Platform.

Our network services are provided through cellular, satellite, broadband and wireline networks. Cellular networks include national and regional wireless telecommunication carriers and consist of second (2G), third (3G) and fourth generation (4G and LTE) cellular telephone technology. Several wireless carriers have announced their intention to discontinue their 2G networks and fully deploy 3G and 4G networks between 2016 and 20182020 while other carriers have announced their intention to discontinue 2G networks as early as 2020. We intend to continue support existing 2G customers through the transition to subsequent technology. Additionally, we have introduced 3G/4G and LTE products offering advanced services across our product lines.

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

During the quarter ended March 31, 2016, we had revenues of $18.1 million, and a net loss of $2.3 million; compared with revenues and a net loss of $21.7 million and $0.6 million, respectively for the quarter ended March 31, 2015.

Our core strategy is to generate long term and sustainable recurring revenues through a portfolio of managed, end-to-end IoT solutions which are generally sold on a strategic transformation as advancessubscription basis and built on our horizontal, integrated platform. Our solutions incorporate the key IoT building blocks – Device, Network, Application and Platform. Our solutions also simplify the implementation and improve the speed to market for enterprise users in technology have changedselect, targeted verticals in the way our customers interact in their professionalasset monitoring and personal livesoptimization, asset tracking, and the way that businesses operate. To meet the changing needs of our customerssafety and to address the changing technological landscape, we are focusing efforts on higher margin and growing areas of business. security markets.

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

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

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

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

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, we perform our annual assessment of goodwill for impairment as of October 1. The valuations of goodwill and other intangible assets require assumptions and estimates of many critical factors, including projections of revenues, costs, operating cash flows, capital expenditures, terminal growth rates and discount rates. As part of our assessment as of October 1, 2014, and as disclosed in our Quarterly Report for the quarterly period ended June 30, 2015, we projected significant growth for certain of our smaller product lines. Lower revenue growth and operating results for these product lines and/or unfavorable changes in other economic factors could impact the underlying key assumptions and our estimated fair values, potentially leading to a future non-cash impairment charge for either or both goodwill and other intangible assets. In September 2015, we recorded a $1.3 million in impairment charges to goodwill and other intangible assets in our Do-It-Yourself (DIY) reporting unit. We also recorded an additional $1.1 million inventory reserve for older inventory and $1.3 million impairment charge for prepaid expenses and other assets. The impairment charge for prepaid expenses and other assets was primarily related to new and modified agreements with wireless carriers and the impairment charge affected multiple reporting units.

On May 5, 2014, we acquired the business operations of Omnilink, the financial results of which have now been included in our consolidated results. The purchase consideration of $37.5 million was composed of a cash payment of $37.3 million and a working capital adjustment of $0.2 million.

During the quarter ended September 30, 2015, we had revenues of $23.3 million and a net loss of $16.4 million compared with revenues and net income from continuing operations for the quarter ended September 30, 2014 of $25.7 million and of $0.3 million, respectively.

For the nine months ended September 30, 2015, we had revenues of $70.7 million and a net loss of $16.7 million compared with revenues and net income from continuing operations for the nine months ended September 30, 2014 of $69.0 million and $1.1 million, respectively.

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

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

Cost of sales for the three and nine months ended September 30, 2015 includes a significant increase in the inventory reserve of $1.1 million and impairment of other assets of $1.3 million. We entered into new and amended agreements with wireless carriers in September 2015 that make adding 2G devices to wireless networks financially unfavorable under most circumstances. As a result of these agreements, we performed a lower of cost or market analysis leading to the increased reserve related to older, 2G cellular telecommunication devices and older satellite devices as well as an accrual for a purchase commitment related to raw materials for the older satellite devices that we will not fulfill.

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

Our Do-It-Yourself (DIY) product line and reporting unit is not generating results of operations consistent with our expectations and previous forecasts and management is evaluating different strategic options for the reporting unit. These factors were triggering events that it was more likely than not that the fair value of the DIY reporting unit was less than its carrying amount. As a result, we performed our initial assessment of Goodwill for impairment of the DIY reporting unit, along with other intangible assets of the reporting unit, in the period ending September 30, 2015. The DIY reporting unit included $2.6 million in recorded goodwill and $0.6 million carrying value of patents along with an additional $1.3 million in other intangible assets.

We estimated the fair value of the reporting unit using a combination of market and income approaches and concluded that the estimated fair value of the reporting unit was less than its carrying value. We assessed the implied fair value of goodwill in the same manner as if we were acquiring the reporting unit in a business combination. Specifically, we allocated the estimated fair value of the reporting unit to all of the assets and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation, referred to as Step 2. We assessed the amortizing long-lived assets for impairment based on undiscounted cash flows and concluded that the carrying value of patents may not be recoverable. As a result, the fair value of patents was estimated using an income approach.

Based on preliminary Step 2 calculations, we have recorded impairments of $0.9 million for goodwill and $0.3 million for patents during the period ending September 30, 2015. The amount of the impairments is an estimate that has not been finalized prior to filing this quarterly report. We expect to finalize Step 2 of the goodwill analysis and finalize the impairment of patents during the quarter ended December 31, 2015.

At September 30, 2015, we determined that we would not meet the criteria of “more likely than not” that the cumulative federal net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our cumulative loss over the past three years. Accordingly, we recorded a valuation allowance against these items. The deferred tax assets consist of federal net operating losses, state net operating losses, tax credits, and other deferred tax assets, most of which expire between 2015 and 2035. As a result of recording a valuation allowance as of September 30, 2015, we recognized deferred tax expense of $10.4 million and $10.1 million for the three and nine months ended September 30, 2015. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance.

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. We will maintain the valuation allowance against the net deferred tax assets until sufficient positive evidence outweighs any negative evidence to support reversal. Future reversals or increases to the valuation allowance could have a significant impact on our future earnings.

Results of Operations

Three Months Ended September 30, 2015 and 2014

The following table sets forth selected financial data from our unaudited condensed consolidated resultsstatements of operations and comprehensive loss for the periods indicated including comparative informationalong with the percentage change between the periods (dollars in thousands):

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(1) – Adjusted EBITDA is not a financial measure prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). See further discussion, including reconciliation to the most comparable GAAP measure, under the caption Non-GAAP Financial Measures below.

Total revenue decreased $2.3 million, or 9.1%, for the three months ended September 30, 2015 to $23.3 million from $25.7 million for the same period in 2014. The decrease reflects the loss of one customer due to non-payment and other losses associated with network customers’ 2G conversions where we did not have a competitive offer. The decrease in revenue is also attributed to a strategic shift from offering customers a network- or application-only solution, to a higher margin, integrated managed service that includes the full suite of Numerex DNA.

Embedded devices and hardware revenues decreased $0.5 million or 6.4% to $7.7 million for the three months ended September 30, 2015 compared to $8.2 million for the same period in 2014. The majority of the decrease pertains to the timing of one of our largest customer’s periodic high volume purchases of hardware modules. Purchases from this customer were $5.2 million and $5.4 million for the three months ended September 30, 2015 and 2014, respectively. Sales of embedded devices and hardware are also adversely affected by our shift to a managed service offering of Numerex DNA noted above instead of selling hardware as separate components. Because of this shift, we anticipate hardware revenue will continue to fluctuate and also decrease in total over time.

Total cost of revenue for the three months ended September 30, 2015 increased $1.7 million, or 11.6%, to $16.0 million compared to $14.4 million for the same period in 2014. Comprising that increase, the direct cost of revenue for subscription and support services decreased $0.5 million, or 6.7%, to $6.5 million for the three months ended September 30, 2015 compared to $7.0 million for the same period in 2014. Subscription and support revenue less direct costs was $9.1 million, or 58.2% of subscription support revenue for the three months ended September 30, 2015 compared to $10.4 million, or 59.8% of subscription support revenue for the three months ended September 30, 2014. The year over year decrease in direct costs of subscription and support revenue and the corresponding increase as a percentage of revenue are attributed to the overall decline in revenue.

The direct cost of revenue for embedded devices and hardware decreased $0.3 million, or 3.8%, to $7.0 million for the three months ended September 30, 2015 compared to $7.2 million for the same period in 2014. Embedded devices and hardware revenue less direct costs was $0.8 million, or 9.8% of embedded devices and hardware revenue for the three months ended September 30, 2015 compared to $1.0 million, or 12.1% of embedded devices and hardware revenue for the three months ended September 30, 2014. The year over year decrease in direct costs of embedded devices and hardware relates primarily to overall revenue decline as well as the customer and product mix. Customer and product mix also caused direct cost of embedded devices and hardware as a percentage of corresponding revenue to increase to 90.2% for the three months ended September 30, 2015 from 87.9% for the same period in 2014.

As described in the Overview above, we entered into new and amended agreements with wireless carriers in September 2015. As a result of these agreements, we performed a lower of cost or market analysis leading to a significant increase in the inventory reserve of $1.1 million during the three months ended September 30, 2015 related to older, 2G cellular telecommunication devices and older satellite devices as well as an accrual for a purchase commitment related to raw materials for the older satellite devices that we will not fulfill. In addition, one of the amended carrier agreements led to settlement of a pre-existing relationship and a $1.3 million impairment of a prepaid expense during the three months ended September 30, 2015. The prepaid expense was previously recorded in other assets.

Sales and marketing expense remained consistent year over year in total dollars, but increased as a percentage of total revenue to 13.1% for the three months ended September 30, 2015 compared to 11.8% of total revenue for the same period in 2014.

General and administrative expenses increased $1.1 million to $4.5 million for the three-month period ended September 30, 2015, compared to $3.4 million for the three-month period ended September 30, 2014. As a percentage of net sales, general and administrative expenses increased to 19.3% for the three months ended September 30, 2015 compared to 13.4% for the three months ended September 30, 2014. General and administrative expenses for the three months ended September 30, 2015 includes $0.5 million for the new chief executive officer relocation and recruiting costs and $0.2 million for an immaterial correction of an error relating to international value-added and sales taxes.

Engineering and development expenses decreased 9.4% to $2.2 million for the three-month period ended September 30, 2015, compared to $2.4 million for the three-month period ended September 30, 2014. The decrease was primarily attributed to cost management as reduction in employee costs was the main driver. Engineering and development expenses decreased to 9.4% of total revenue for the three months ended September 30, 2015 compared to 9.5% of total revenue for the same period in 2014.

Depreciation and amortization expense increased 31.5% to $2.1 million for the three-month period ended September 30, 2015, compared to $1.6 million for the three-month period ended September 30, 2014. The increase in depreciation and amortization is related to recently acquired product lines and development of new product and project initiatives, including the amortization of new intangible assets. The increase also includes $0.4 million for managed service devices and hardware used by a financially troubled customer at risk of not being returned to us.

The $1.3 million impairment of goodwill and other intangible assets recorded in the three months ended September 30, 2015 was related to our DIY reporting unit as described in the Overview above.

Interest expense decreased $0.1 million to $0.2 million for the three-month period ended September 30, 2015 compared to $0.3 million for the same period in 2014. The decrease is due to full payment of the seller financed promissory note from the acquisition of a small technology company in 2012.

We recorded a provision for income tax expense of $10.4 million for the three months ended September 30, 2015 and $0.4 million for the three months ended September 30, 2014. The effective tax rates were (174.1%) and 57.6% for the three months ended September 30, 2015 and 2014, respectively. The effective tax rate for the three months ended September 30, 2015 differed from the federal statutory rate of 34% primarily as a result of recording the valuation allowance for net deferred tax assets.

For the three months ended September 30, 2014, the difference between our effective tax rate and the federal statutory tax rate resulted primarily from (1) the income tax benefit for the capital loss from the disposal of discontinued operations effective June 30, 2014 and the ability to offset capital gains in the current tax year and to carry back for capital gains in prior tax years, (2) the portion of transaction costs incurred in the Omnilink merger that were not deductible for income taxes and (3) state income taxes, including the tax effect of changes in effective state income tax rates resulting from the Omnilink merger.

Nine Months Ended September 30, 2015 and 2014

The following table sets forth selected consolidated results of operations for the periods indicated, including comparative information between the periods (dollars in thousands):