6-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign issuer

Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

For the Month of March 2016

(Commission File.  No 0-30718).

SIERRA WIRELESS, INC., A CANADIAN CORPORATION

(Translation of registrant’s name in English)

13811 Wireless Way

Richmond, British Columbia, Canada V6V 3A4

(Address of principal executive offices and zip code)

Registrant’s Telephone Number, including area code: 604-231-1100

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F:

Form 20-F o 40-F ý

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes: o No: ý

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Sierra Wireless, Inc.
	By:	/s/ David G. McLennan
		David G. McLennan, Chief Financial Officer and Secretary
Date: March 1, 2016

EX-99.1

Sierra Wireless, Inc.

Financial Highlights

(Expressed in thousands of United States dollars, except as otherwise stated)

(Prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"))

Consolidated Statement of Operations Data

Years ended December 31,	2015			2014			2013
GAAP results
Revenue	$	607,798		$	548,523		$	441,860
Gross margin percentage	31.9		%	32.6		%	33.0		%
Total expenses	183,741			185,573			163,305
Earnings (loss) from operations	10,114			(6,594		)	(17,664		)
Net loss from continuing operations	(2,674		)	(16,853		)	(15,550		)
Net earnings from discontinued operations	—			—			70,588
Net earnings (loss)	(2,674		)	(16,853		)	55,038
Basic and diluted net loss from continuing operations per share (in dollars)	$	(0.08	)	$	(0.53	)	$	(0.50	)
Non-GAAP results(1)
Gross margin percentage	32.0		%	32.7		%	33.1		%
Total expenses	$	162,141		$	156,740		$	140,994
Earnings from operations	32,361			22,794			5,053
Adjusted EBITDA	42,911			35,411			18,702
Net earnings from continuing operations	25,774			19,848			6,942
Net earnings from discontinued operations	—			—			4,420
Net earnings	25,774			19,848			11,362
Basic and diluted net earnings from continuing operations per share (in dollars)	$	0.80		$	0.63		$	0.23
Free cash flow	$	(546	)	$	37,871		$	3,246
Revenue by segment
OEM Solutions	$	523,366		$	476,650		$	382,016
Enterprise Solutions	63,072			71,873			59,844
Cloud and Connectivity Services	21,360			—			—
	$	607,798		$	548,523		$	441,860
Revenue by geographical region
Americas	32		%	29		%	31		%
Europe, Middle East and Africa	19		%	16		%	21		%
Asia-Pacific	49		%	55		%	48		%
	100		%	100		%	100		%
Consolidated Balance Sheet Data
December 31,	2015			2014			2013
Cash and cash equivalents, including short-term investments	$	93,936		$	207,062		$	179,886
Long-term obligations	$	44,353		$	26,608		$	21,550
Shareholders' equity	$	358,296		$	356,862		$	362,996
Number of common shares outstanding	32,337,201			31,868,541			31,097,844
(1) Our non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, acquisition-related costs, restructuring costs, integration costs, acquisition amortization, impairment, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments. Adjusted EBITDA is non-GAAP earnings (loss) from operations plus stock-based compensation expense and related social taxes, acquisition-related costs, restructuring costs, integration costs, impairment, and amortization. Free cash flow as defined equates cash flow from operating activities less capital expenditures and increases in intangibles. Non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to similar measures presented by other companies. For further information, refer to "Non-GAAP Financial Measures" on page 29 of the Management's Discussion and Analysis in this Annual Report.

Report to Shareholders

In 2015, the company achieved record revenue of $607.8 million and delivered improved operating results year-over-year. Our adjusted EBITDA increased 21 percent to $42.9 million compared to 2014 and our non-GAAP earnings from operations increased 42 percent to $32.4 million.

In 2015, our OEM Solutions business was a key driver of growth for the company, with strong contribution from the Automotive segment as connected cars continue to gain momentum worldwide. We also experienced solid growth in the Energy segment as utilities increased their deployments of smart metering and in the Enterprise Networking segment as more companies migrated away from traditional wireline broadband and selected 4G LTE connectivity for distributed retail locations. In 2015, we had very strong OEM design win activity, securing just over $1 billion in new design wins which was significantly higher than we achieved in 2014. This indicates a growing number of new IoT deployments across different market segments, and provides strong support to our expectation for future revenue growth. Also in 2015, ABI Research published its most recent IoT embedded cellular module market report, which once again ranked Sierra Wireless as the #1 company in the global market with 35% market share.

Our Enterprise Solutions business improved significantly in the second half of 2015 compared to the first half as additional sales investments were made and new gateway products launched. We are committed to growing this line of business as the market for mobile, industrial and enterprise gateway solutions continues to expand.

During this past year, we were very active in acquiring companies that accelerate our strategy. The company completed three key acquisitions that allowed us to rapidly scale our new Cloud and Connectivity Services line of business. These acquired companies - which include Wireless Maingate, Accel Networks, and MobiquiThings - are now an integral part of our company’s overall device-to-cloud strategy, significantly strengthening our ability to provide fully-integrated end-to-end solutions that enable our customers to easily connect their fixed and mobile assets to the cloud, and to seamlessly analyze and manage their deployments.

We believe that our device-to-cloud approach to the market is unique, and enables us to bring more value to our customers, thereby capturing higher-value revenue and creating long term value for shareholders. As we continue to grow our business organically, and through acquisition, we expect that our Enterprise Solutions and Cloud and Connectivity Services businesses will outpace the growth of our OEM Solutions business. We expect the faster growth of these higher value businesses will help the company to improve its consolidated gross and operating profit margins over time.

In summary, we made significant progress in 2015 further strengthening our position in the IoT market - completing three strategic acquisitions in cellular connectivity, rapidly expanding our position in the value chain, realigning our team to drive growth and making significant organic investments. Our three business segments are now collectively focused on a larger and expanding market opportunity. We believe that we are better positioned than ever to capture a significant share of this opportunity, and to generate significant value for our shareholders over the long term.

Jason W. Cohenour

President and Chief Executive Officer

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this letter constitute forward-looking statements or forward-looking information and, in this regard, you should read carefully the "Cautionary Note Regarding Forward-Looking Statements" in the attached Management's Discussion & Analysis.

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Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS	3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	4
OVERVIEW	6
Business Overview	6
Our Strategy	7
Annual Overview - Financial Highlights	9
Outlook	13
Disposition of AirCard Business	14
CONSOLIDATED ANNUAL RESULTS OF OPERATIONS	15
Fiscal Year 2015 compared to Fiscal Year 2014	15
Fiscal Year 2014 compared to Fiscal Year 2013	18
SEGMENTED INFORMATION	20
FOURTH QUARTER OVERVIEW	22
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS	24
LIQUIDITY AND CAPITAL RESOURCES	26
NON-GAAP FINANCIAL MEASURES	29
OFF-BALANCE SHEET ARRANGEMENTS	31
TRANSACTIONS BETWEEN RELATED PARTIES	32
CRITICAL ACCOUNTING POLICIES AND ESTIMATES	32
OUTSTANDING SHARE DATA	36
IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING CURRENT PERIOD	37
IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS	37
DISCLOSURE CONTROLS AND PROCEDURES	38
INTERNAL CONTROL OVER FINANCIAL REPORTING	38
LEGAL PROCEEDINGS	39
RISKS AND UNCERTAINTIES	41
CONSOLIDATED FINANCIAL STATEMENTS	51

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information for the years ended December 31, 2015, 2014 and 2013 and up to and including February 29, 2016.  This MD&A should be read together with our audited consolidated financial statements and the accompanying notes for the year ended December 31, 2015 (“the consolidated financial statements”).  The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  Except where otherwise specifically indicated, all amounts in this MD&A are expressed in United States dollars.

We have prepared this MD&A with reference to National Instrument 51-102 “Continuous Disclosure Obligations” of the Canadian Securities Administrators.  Under the U.S./Canada Multijurisdictional Disclosure System, we are permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, which requirements are different than those of the United States.

Certain statements in this MD&A constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws.  You should carefully read “Cautionary Note Regarding Forward-looking Statements” in this MD&A and should not place undue reliance on any such forward-looking statements.

Throughout this document, references are made to certain non-GAAP financial measures that are not measures of performance under U.S. GAAP.  Management believes that these non-GAAP financial measures provide useful information to investors regarding the Company’s results of operations as they provide additional measures of its performance and assist in comparisons from one period to another.  These non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.  These non-GAAP financial measures are defined and reconciled to their nearest GAAP measure in “Non-GAAP Financial Measures” and "Liquidity and Capital Resources".

In this MD&A, unless the context otherwise requires, references to "the Company", "Sierra Wireless", "we", "us" and "our" refer to Sierra Wireless, Inc. and its subsidiaries.

Additional information about the Company, including our most recent consolidated financial statements and our Annual Information Form, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

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Cautionary Note Regarding Forward-looking Statements

This MD&A contains certain statements and information that are not based on historical facts and constitute forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws (“forward-looking statements”), including our business outlook for the short and longer term and statements regarding our strategy, plans and future operating performance.  Forward-looking statements are provided to help you understand our views of our short and longer term plans, expectations and prospects. We caution you that forward-looking statements may not be appropriate for other purposes.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are not promises or guarantees of future performance, they represent our current views and may change significantly. Forward-looking statements are based on a number of material assumptions, including, but not limited to, those listed below, which could prove to be significantly incorrect:

• our ability to develop, manufacture and sell new products and services that meet the needs of our customers and gain commercial acceptance;

• our ability to continue to sell our products and services in the expected quantities at the expected prices and expected times;

• expected cost of goods sold;

• expected component supply constraints;

• our ability to “win” new business;

• our ability to integrate acquired businesses and realize expected benefits;

• expected deployment of next generation networks by wireless network operators;

• our operations not being adversely disrupted by component shortages or other development, operating or regulatory risks; and

• expected tax rates and foreign exchange rates.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ significantly from those expressed or implied in our forward-looking statements, including, without limitation:

• competition from new or established service providers or from those with greater resources;

• disruption of, and demands on, our ongoing business and diversion of management’s time and attention in connection with acquisitions or divestitures;

• the loss of any of our significant customers;

• cyber-attacks or other breaches of our information technology security;

• we may be found to infringe on intellectual property rights of others;

• we may not be able to obtain necessary rights to use software or components supplied by third parties;

• we may be unable to enforce our intellectual property rights;

• our ability to attract or retain key personnel;

• we may experience difficulty responding to changing technology, industry standards and customer requirements;

• our financial results are subject to fluctuation;

• difficult or uncertain global economic conditions;

• unanticipated costs associated with litigation or settlements;

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• failures of our products or services due to design flaws and errors, component quality issues, manufacturing defects or other quality issues;

• our dependence on a limited number of third party manufacturers;

• our reliance on single source suppliers for certain components used in our products;

• our dependence on wireless network carriers to promote and offer acceptable wireless data services;

• risks related to contractual disputes with counterparties;

• we are subject to governmental regulation;

• the transmission, use and disclosure of user data and personal information could give rise to liability or additional costs; and

• we have operations outside of North America and therefore are subject to risks inherent in foreign jurisdictions.

This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to below under "Risks and Uncertainties" and those referred to in our other regulatory filings with the U.S. Securities and Exchange Commission (the "SEC") in the United States and the provincial securities commissions in Canada.

Our forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and we do not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by applicable law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

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OVERVIEW

Business Overview

Sierra Wireless is building the Internet of Things ("IoT") with intelligent wireless solutions that empower organizations to innovate in the connected world. We offer the industry’s most comprehensive portfolio of second generation ("2G"), third generation ("3G") and fourth generation ("4G") cellular embedded wireless modules and gateways, seamlessly integrated with our secure cloud and connectivity services. Original Equipment Manufacturers ("OEMs") and enterprises worldwide trust our innovative cellular solutions to get their connected products and services to market faster.

In 2015, we significantly advanced our device-to-cloud strategy by successfully completing three acquisitions and rapidly expanding our cloud and connectivity services business. On January 16, 2015, we acquired all of the shares of Wireless Maingate AB, a Sweden-based provider of M2M connectivity and data management services.  Mid-year, on June 18, 2015, we acquired substantially all of the assets of Accel Networks LLC, a leader in managed cellular broadband technology and connectivity services in North America.  On September 2, 2015, we acquired all of the shares of MobiquiThings SAS, a France-based mobile virtual network operator focused on the global machine-to-machine and telematics marketplace. 

As a result of the three business acquisitions and a reorganization to drive focus and growth in our key lines of business, effective October 1, 2015, we are operating the Company under three reportable segments: (i) OEM Solutions; (ii) Enterprise Solutions; and (iii) Cloud and Connectivity Services. Prior to October 1, our Enterprise Solutions segment included the business operations that now comprise our new Cloud and Connectivity Services segment.

Our OEM Solutions segment includes cellular embedded modules, software and tools for OEM customers to integrate wireless cellular connectivity into products and solutions across a broad range of industries, including automotive, transportation, energy, enterprise networking, sales and payment, mobile computing, security, industrial monitoring, field services, residential, healthcare and others. Within our OEM Solutions segment, our embedded wireless module product portfolio spans 2G, 3G, and 4G cellular technologies. This product portfolio also includes cloud-based remote device management capability and support for on-board embedded applications using our open source, Linux-based application framework, called Legato and MangOh, a low cost customizable product development platform to accelerate prototypes and simplify the industrialization of IoT solutions.

Our Enterprise Solutions segment includes a range of intelligent gateways and management tools and applications that enable cellular connectivity for mobile, industrial and enterprise customers. Our 2G, 3G and 4G LTE intelligent cellular gateways are designed for use where reliability and security are essential, and are used in transportation, public safety, field services, energy, industrial, and enterprise networking applications worldwide. Our gateways can be easily configured for specific customer applications, and also support on-board embedded applications using our ALEOS application framework.

The Cloud and Connectivity Services business segment comprises three main areas of operation: (i) our cloud services business, which provides a secure and scalable cloud based platform for deploying and managing IoT applications; (ii) our connectivity services, which includes our Smart SIM supported by our mobile core networks; and (iii) our managed wireless broadband services business. The Cloud and Connectivity services support our fully integrated device-to-cloud strategy and are designed to enable worldwide IoT deployments by our customers. Our cloud based platform services can be used to collect, manage and process data from any number of connected assets across any network operator around the world. This device-to-cloud data connection provides our customers with a fully integrated, end-to-end solution that is simple to deploy and allows our customers to build their IoT applications without investing in infrastructure.  Our cloud based platform can also be used to centrally deploy and monitor IoT devices at the edge of the network, including configuring device settings and delivering firmware and embedded application updates remotely over the air.  Our SIM and connectivity services provide global, multi-operator subscriptions with unique benefits for IoT deployments such as quality of service

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improvements and consolidated multi-operator network coverage. Our broadband services provide proactive network management solutions utilizing cellular broadband gateways, routers and advanced antennas.

Our Strategy

We expect the global IoT market to grow significantly over the next decade. Enterprises, governments, and consumers are gaining a broader understanding of the benefits of collecting, storing and delivering data from machines and assets at the edge of the network to enable detailed analysis, monitoring, and enhanced services. New IoT applications are helping people and organizations to increase productivity, save energy costs, create new business models, and provide value-added services to their customers. An integral factor in the growth of IoT applications is cellular connectivity, which enables the transmission of data from embedded modules and gateways, through advanced mobile networks and cloud services, to the enterprise or consumer. Cellular connectivity supports applications such as the connected car, the connected home, the connected enterprise, as well as smart cities and the smart grid. Adoption of IoT solutions is driven by a number of factors including lower wireless connectivity costs, higher wireless connection speeds, new wireless technologies designed specifically for the IoT, new devices and tools to simplify application development and increasing levels of focus and investment from many large ecosystem players.

We believe these factors will continue to create attractive growth opportunities for the Company going forward. Based on third-party industry data, we are the global leader in embedded wireless modules with 35% global market share (source: ABI Research, June 2015) and we are widely recognized as the innovation leader in the cellular IoT sector as well.  We are also a leading provider of gateway and router solutions for industrial, enterprise and mobile applications. We have developed a cloud services platform that is highly integrated with our devices and embedded application software and, through recent acquisitions, we now offer wireless connectivity services. Our corporate strategy is to expand our business across the IoT value chain by:

• Solidifying our leadership position in cellular embedded modules;

• Enhancing our enterprise gateways business with new products and selective acquisitions that strengthen our position;

• Continuing to innovate and expand into more IoT segments and geographical markets;

• Leveraging our leading position in IoT devices to build integrated device-to-cloud solutions, providing our customers with simple, scalable and secure solutions that include wireless connectivity services; and

• Accelerating revenue growth and improving operating leverage in our business model, to increase profitability and enhance shareholder value.

In 2015, we continued to deliver on our corporate strategy by:

• Growing revenues by 10.8% compared to 2014 through organic growth and additional revenues from our acquisitions;

• Successfully completing the acquisition of the following businesses that are now the core of our cloud and connectivity services business:

◦ On January 16, 2015 we acquired all of the outstanding shares of Wireless Maingate AB ("Maingate") for $91.6 million. Maingate is a leading provider of managed connectivity services in Europe. Maingate has its own core network and is a fully licensed mobile network operator with its own subscription management system, billing, and other capabilities in connectivity services.

◦ On June 18, 2015, we completed the acquisition of substantially all of the assets of Accel Networks LLC ("Accel") for $9.5 million in cash with contingent consideration of up to an additional $1.5 million under a performance-based earnout formula. Accel is a provider of 4G LTE managed connectivity services in the United States with enterprise customers in sectors such as retail, finance, security, energy, and hospitality.

◦ On September 2, 2015, we completed the acquisition of all the outstanding shares of MobiquiThings SAS ("MobiquiThings") for €13.5 million ($15.2 million) in cash with contingent

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consideration of up to an additional €12 million ($13.5 million) under a performance-based earnout formula. MobiquiThings is a European provider of managed connectivity services for the IoT. This acquisition provided us with an advanced core network platform that is fully integrated with the Maingate wireless services offering and our existing AirVantage Cloud service;

• Continuing to secure new design wins with global OEMs and significantly increasing the lifetime value of our customer program pipeline;

• Expanding our product line offering in Enterprise Solutions;

• Continuing to improve our financial performance, with Non-GAAP operating margin increasing to 5.3% from 4.2% in 2014 and adjusted EBITDA margins increasing to 7.1% from 6.5% in 2014 (see "Non-GAAP Financial Measures"); and

• Strengthening our broader organizational capability, including additional go-to-market resources to support our continued growth.

We continue to seek opportunities to acquire or invest in businesses, products and technologies that accelerate our strategy and growth.

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Annual Overview — Financial highlights

In 2015, our revenue increased by 10.8% to $607.8 million, compared to 2014. This increase in revenue was driven by growth in our OEM Solutions segment as well as contributions from acquisitions completed in 2015 in our Cloud and Connectivity Services segment. Our OEM Solutions segment revenues grew by 9.8% to $523.4 million compared to 2014 while our Enterprise Solutions segment revenues decreased by 12.2% to $63.0 million compared to 2014 due to lower sales of our AirLink gateway products. Cloud and Connectivity Services revenue was $21.4 million in 2015. We have not disclosed comparative information for this new segment as the related business prior to 2015 was not material.

Foreign exchange rate changes impacted our Euro denominated revenue and Canadian dollar and Euro denominated operating expenses. We estimate that changes in exchange rates between 2015 and 2014 reduced our gross margin by approximately $2.4 million and reduced our operating expenses by approximately $10.9 million in 2015.

GAAP

• 2015 revenue increased by $59.3 million, or 10.8%, compared to 2014, reflecting continued growth in the OEM Solutions segment and contributions from acquired businesses.

• Gross margin was 31.9%, down 0.7% from 2014, mainly due to the increased volume of lower margin products sold in 2015.

• Operating earnings improved by $16.7 million, or 253.4%, compared to 2014, due to revenue growth, partially offset by increases in cost of goods sold.

• Net loss improved by $14.2 million, or 84.1%, from 2014 mainly due to improved operating earnings in 2015.

• Cash and cash equivalents were $93.9 million at the end of the year, a decrease of $113.1 million compared to 2014. This largely reflects the use of funds for the acquisitions of Maingate, Accel and MobiquiThings in 2015, as well as the purchase of an end of life 2G component in sufficient volume to support future sales of certain legacy products.

Non-GAAP⁽¹⁾ 

• Gross margin was 32.0%, down 0.7% from 2014, mainly due to increased volume of lower margin products sold in 2015.

• Operating earnings improved by $9.6 million, or 42.0% compared to 2014, as a result of revenue growth, partially offset by higher operating expenses driven mainly by costs added as a result of our recent acquisitions.

• Adjusted EBITDA increased by $7.5 million, or 21.2% compared to fiscal 2014, reflecting revenue growth in our OEM Solutions segment.

• Net earnings increased by $5.9 million, or 29.9% compared to 2014, mainly due to improved operating earnings partially offset by higher income tax expenses.

⁽¹⁾Non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, acquisition amortization, impairment, gain on sale of AirCard business, acquisition-related and disposition costs, integration costs, restructuring costs, foreign exchange gains or losses on translation of balance sheet accounts and certain tax adjustments. Refer to "Non-GAAP financial measures" for additional details.

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⁽¹⁾Non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, acquisition amortization, impairment, gain on sale of AirCard business, acquisition-related and disposition costs, integration costs, restructuring costs, foreign exchange gains or losses on translation of balance sheet accounts and certain tax adjustments. Refer to "Non-GAAP financial measures" for additional details.

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Selected Annual Financial information:

(in thousands of U.S. dollars, except where otherwise stated)	2015			2014			2013
Statement of Operations data:
Revenue	$	607,798		$	548,523		$	441,860
Gross Margin
- GAAP	$	193,855		$	178,979		$	145,641
- Non-GAAP (1)	194,502			179,534			146,047
Gross Margin %
- GAAP	31.9		%	32.6		%	33.0		%
- Non-GAAP (1)	32.0		%	32.7		%	33.1		%
Earnings (loss) from operations
- GAAP	$	10,114		$	(6,594	)	$	(17,664	)
- Non-GAAP (1)	32,361			22,794			5,053
Adjusted EBITDA	$	42,911		35,411			18,702
Net earnings (loss) from continuing operations
- GAAP	$	(2,674	)	$	(16,853	)	$	(15,550	)
- Non-GAAP (1)	25,774			19,848			6,942
Net earnings from discontinued operations
- GAAP	$	—		$	—		$	70,588
- Non-GAAP (1)	—			—			4,420
Net earnings (loss)
- GAAP	$	(2,674	)	$	(16,853	)	$	55,038
- Non-GAAP (1)	25,774			19,848			11,362
Revenue by Segment:
OEM Solutions	$	523,366		$	476,650		$	382,016
Enterprise Solutions	63,072			71,873			59,844
Cloud and Connectivity Services	21,360			—			—
Share and per share data:
Basic and diluted earnings (loss) from continuing operations per share (in dollars)
- GAAP	$	(0.08	)	$	(0.53	)	$	(0.50	)
- Non-GAAP (1)	$	0.80		$	0.63		$	0.23
Basic and diluted earnings (loss) per share (in dollars)
- GAAP	$	(0.08	)	$	(0.53	)	$	1.79
- Non-GAAP (1)	$	0.80		$	0.63		$	0.37
Common shares (in thousands)
At period-end	32,337			31,869			31,098
Weighted average - basic and diluted	32,166			31,512			30,771
Balance sheet data (end of period):
Cash and cash equivalents and short-term investments	$	93,936		$	207,062		$	179,886
Total assets	546,332			515,364			512,000
Total long-term obligations	44,353			26,608			21,550

⁽¹⁾Non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, acquisition amortization, impairment, gain on sale of AirCard business, acquisition-related and disposition costs, integration costs, restructuring costs, foreign exchange gains or losses on translation of balance sheet accounts, and certain tax adjustments.  Refer to “Non-GAAP financial measures” for additional details.

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See discussion under “Consolidated Annual Results of Operations” for factors that have caused period to period variations.

Other key business highlights for the year ended December 31, 2015:

• We announced a strategic collaboration with L&T Technology Services, which is establishing a center of excellence to support customers worldwide in developing their IoT applications using our Legato embedded application platform.

• We reached a new milestone in our collaboration with PSA Peugeot Citroen, with a next-generation design win using AirPrime AR Series smart automotive modules, the Legato platform and the AirVantage cloud.

• We introduced Project mangOH, a wireless open hardware reference design, with an open interface standard developed by us, as part of our ongoing strategy to expand and accelerate innovation in the IoT.

• We were selected by Arval, a leader in full service vehicle leasing and fleet management, for deployment of our device-to-cloud technology to help build its new global telematics solutions.

• We were recently awarded the "Best Gateway for Branch Offices, Fast Food and Casual Dining of the Year" in the M2M/IoT category by Compass Intelligence, a global market research and consulting firm, for our 4G LTE AirLink ES450 Enterprise Cellular Gateway.

OEM Solutions

• We introduced four new AirPrime embedded modules, the first to support LTE-Advanced networks worldwide (LTE-A). LTE-A is the latest generation of 4G LTE network standards, aimed at improving network capacity, throughput, data speed and operational cost-efficiency.

• We introduced the next-generation AirPrime WP Series of smart wireless modules, designed to reduce system complexity and accelerate the development of connected products and applications for the Internet of Things.

• We announced that Iskraemeco, one of the leading providers of Advanced Metering Management (AMM) systems in the world, has selected our AirPrime HL Series to enable cellular connectivity in smart metering deployments worldwide.

• We announced that Itron has selected our AirPrime HL Series modules to enable cellular connectivity in its latest line of smart gas meters.

• Maestro Wireless Solutions Limited, a leading provider of tracking devices for IoT applications globally, has announced that its first LTE Cat-1 tracker is based on our AirPrime HL Series.

• Our AirPrime EM7455, the industry's first embedded module to support LTE-Advanced, has been selected by Lenovo to provide fast and reliable LTE-Advanced cellular connectivity in next-generation notebooks, tablets, and 2-in-1s.

• Our new HL7690 LTE Cat-1 embedded modules were selected by Sagemcom, a leading European communications equipment provider, for its smart meters to be deployed by Enexis in the Netherlands.

• Our AirPrime HL Series embedded modules were selected by Parkeon, a global leader in parking, transit and urban mobility solutions, to enable cellular connectivity in smart parking deployments worldwide.

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• Our smart automotive modules were selected by Valeo, the global automotive products and systems company, for a new generation of telematics control units to enable connected car services internationally.

• Secured the largest design win in the Company's history with an international Automotive OEM.

Enterprise Solutions

• We announced the launch of our next generation of AirLink gateways. The AirLink GX450 4G mobile gateway and the AirLink ES450 4G enterprise gateway offer support for a broader array of LTE frequency bands, making them compatible with mobile networks worldwide.

• We announced the commercial availability of FirstNet Band 14 LTE support for the oMG2000 mobile gateway.

• We announced the launch of the AirLink Raven RV50 gateway, the LTE successor to the market's most widely deployed cellular gateway solution for energy and industrial applications. The RV50 offers a rugged design and the lowest power consumption of any LTE industrial gateway, providing reliable connectivity for the most demanding applications.

Cloud and Connectivity Services

• We introduced the IoT Acceleration Platform, the industry's first integrated service platform that combines cloud, IoT hardware, and managed connectivity services for worldwide deployments.

• Recently, we introduced our Smart SIM technology and connectivity service that provides customers with superior coverage and service quality to maximize the reliability of global IoT applications.

Outlook

For the full year 2016, we expect revenue to be in the range of $630 million to $670 million and non-GAAP earnings per share to be in the range of $0.60 to $0.90. In the first quarter of 2016, we expect revenue to be in the range of $135 million to $145 million and non-GAAP earnings per share to be slightly negative to slightly positive.

We believe that the market for wireless IoT solutions has strong long-term growth prospects.  We anticipate strong growth in the number of devices being wirelessly connected, driven by key enablers, such as lower wireless connectivity costs, faster wireless connection speeds, new wireless technologies designed specifically for the IoT, new devices and tools to simplify the development of IoT applications, and increased focus and investment from large ecosystem players.  More importantly, we see strong customer demand emerging in many of our target verticals driven by increasing recognition of the value created by deploying IoT solutions, such as new revenue streams and cost efficiencies.

Key factors that we expect will affect our results in the near term are:

• the timely ramp up of sales of our new products recently launched or currently under development;

• the timely launch and ramp up of new customer programs;

• our ability to secure future design wins with both existing and new customers;

• the availability of components from key suppliers;

• contributions to our operating results from the acquisitions we completed in 2015;

• successful implementation and roll-out of our IoT Acceleration Platform;

• the level of success our customers achieve with sales of connected solutions to end users;

• fluctuations in foreign exchange rates;

• the continuation of our device-to-cloud strategy as we evaluate future acquisitions;

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• general economic conditions in the markets we serve;

• the strength of our competitive position in the market; and

• seasonality in demand.

We expect that product and price competition from other wireless device manufacturers and solution providers will continue to play a role in the IoT market.  As a result of these factors, we may experience volatility in our results on a quarter-to-quarter basis. Gross margin percentage may fluctuate from quarter-to-quarter depending on product and customer mix, average selling prices and product costs.

See "Cautionary Note Regarding Forward-Looking Statements".

Disposition of AirCard Business

On April 2, 2013, we completed the sale of substantially all of the assets and operations related to our AirCard business to Netgear, Inc. (“Netgear”). Proceeds of the disposition, after final inventory adjustments, were $136.6 million plus assumed liabilities and were comprised of cash proceeds of $122.8 million, funds previously held in escrow of $13.8 million and assumed liabilities. After transaction costs of $2.8 million, we recorded an after tax gain on disposal of $70.2 million. On April 3, 2014, we received the full $13.8 million cash proceeds previously held in escrow for realized net cash proceeds of $127.8 million from the divestiture after giving consideration to related taxes and transaction costs.

In accordance with U.S. GAAP, the results of operations and the gain on sale of the AirCard business have been presented as discontinued operations in our consolidated statements of operations for the year ended December 31, 2013. The historical consolidated statements of operations and related selected financial information have been retrospectively adjusted to distinguish between continuing operations and discontinued operations.

Summarized results from discontinued operations for the year ended December 31, 2013 were as follows: 

(in thousands of U.S. dollars)	2013
Revenue	$	46,701
Cost of goods sold	32,978
Gross margin	13,723
Expenses	12,918
Earnings from operations	805
Income tax expense	399
Earnings from operations, net of taxes	406
Gain on sale of AirCard business, net of taxes	70,182
Net earnings from discontinued operations	$	70,588

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CONSOLIDATED ANNUAL RESULTS OF OPERATIONS

(in thousands of U.S. dollars, except where otherwise stated)	2015				2014				2013
	$		% of Revenue		$		% of Revenue		$		% of Revenue
Revenue	607,798		100.0	%	548,523		100.0	%	441,860		100.0	%
Cost of goods sold	413,943		68.1	%	369,544		67.4	%	296,219		67.0	%
Gross margin	193,855		31.9	%	178,979		32.6	%	145,641		33.0	%
Expenses
Sales and marketing	54,144		8.9	%	50,476		9.2	%	42,182		9.6	%
Research and development	74,020		12.2	%	80,937		14.8	%	73,112		16.5	%
Administration	40,321		6.6	%	37,027		6.7	%	35,164		8.0	%
Restructuring	951		0.2	%	1,598		0.3	%	171		—	%
Acquisition-related and integration	1,945		0.3	%	2,670		0.5	%	535		0.1	%
Impairment	—		—	%	3,756		0.7	%	—		—	%
Amortization	12,360		2.0	%	9,109		1.6	%	12,141		2.8	%
	183,741		30.2	%	185,573		33.8	%	163,305		37.0	%
Earnings (loss) from operations	10,114		1.7	%	(6,594	)	(1.2	)%	(17,664	)	(4.0	)%
Foreign exchange gain (loss)	(11,843	)			(12,390	)			3,823
Other income (expense)	115				854				(98	)
Loss before income taxes	(1,614	)			(18,130	)			(13,939	)
Income tax expense (recovery)	1,060				(1,277	)			1,611
Net loss from continuing operations	(2,674	)			(16,853	)			(15,550	)
Net earnings from discontinued operations	—				—				70,588
Net earnings (loss)	(2,674	)			(16,853	)			55,038
Net earnings (loss) per share - basic and diluted (in dollars)
Continuing operations	(0.08	)			(0.53	)			(0.50	)
Discontinued operations	—				—				2.29
	(0.08	)			(0.53	)			1.79

Fiscal Year 2015 Compared to Fiscal Year 2014

Revenue

Revenue increased by $59.3 million, or 10.8%, in 2015 compared to 2014. The increase was mainly driven by growth in OEM Solutions, with solid contributions from automotive, energy, and enterprise networking customers as well as contributions of $20.1 million from the acquired Maingate, Accel and MobiquiThings businesses in 2015. This increase was partially offset by the unfavorable foreign exchange impact on Euro denominated revenue and weaker year-over-year gateway revenue.

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Our geographic revenue mix for the years ended December 31, 2015 and 2014 was as follows:

During the years ended December 31, 2015, 2014 and 2013, no customer accounted for more than 10% of our aggregated revenue, from continuing and discontinued operations.

Gross margin

Gross margin was 31.9% of revenue in 2015, compared to 32.6% in 2014. The modest decrease in gross margin percentage was primarily driven by an increase in sales to high volume but lower margin Automotive OEM customers, combined with lower revenue from our higher margin Enterprise Solutions segment and unfavorable foreign exchange rates. This was partially offset by product cost reductions and the addition of newly acquired, higher margin connectivity services revenue. Gross margin included stock-based compensation expense and related social taxes of $0.6 million in both 2015 and 2014.

Sales and marketing

Sales and marketing expenses increased $3.7 million, or 7.3%, in 2015, compared to 2014 primarily as a result of the additional costs from recent acquisitions and targeted investments in resources to support our go-to-market strategy, partially offset by the favorable impact of foreign exchange. Sales and marketing expenses included stock-based compensation and related social taxes of $2.2 million in both 2015 and 2014.

Research and development

Research and development (“R&D”) expenses decreased by $6.9 million, or 8.5%, in 2015, compared to 2014.  The decrease in R&D expenses was primarily due to lower amortization related to businesses acquired and the favorable impact of foreign exchange, partially offset by higher certification costs and investment in R&D resources.

R&D expenses included stock-based compensation and related social taxes of $1.5 million in 2015, compared to $2.1 million in 2014.  R&D expenses also included acquisition amortization of $1.3 million in 2015, compared to $5.7 million in 2014.

Administration

Administration expenses increased by $3.3 million, or 8.9%, in 2015, compared to 2014, primarily due to additional expenses associated with the acquired Maingate, Accel and MobiquiThings businesses, as well as higher corporate development costs, partially offset by the favorable impact of foreign exchange. Administration expenses

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included stock-based compensation expense and related social taxes of $5.3 million in 2015, compared to $5.6 million in 2014.

Restructuring

Restructuring costs were lower by $0.6 million in 2015, compared to 2014. Restructuring costs in 2015 were related to implementation of a plan to realign responsibilities within our Enterprise Solutions segment to reflect the evolution of our business and to provide dedicated focus on our enterprise gateways and recently acquired cloud and connectivity services businesses. Restructuring costs in 2014 were related to our decision to reduce the scope of 2G chipset development activities.

Acquisition-related and integration

Acquisition-related and integration costs decreased by $0.7 million in 2015, compared to 2014. The decrease was primarily due to a $0.8 million change in the fair value of acquisition-related contingent consideration.

Impairment

In the second quarter of 2014, we made a decision to reduce the scope of 2G chipset development activities, which resulted in a $3.8 million impairment. Management evaluated the recoverability of costs and determined that the expected future cash flows were lower than the carrying value of the assets associated with this project. No such impairment was recorded in 2015.

Amortization

Amortization expense increased by $3.3 million, or 35.7%, in 2015, primarily due to higher acquisition related amortization.  Amortization expense in 2015 included $8.4 million of acquisition amortization compared to $5.2 million in 2014.

Foreign exchange gain (loss)

Foreign exchange loss was $11.8 million in 2015, compared to a loss of $12.4 million in 2014.  Commencing in the second quarter of 2015, we classified an intercompany Euro denominated loan ("Intercompany Loan") as part of a net investment in a foreign subsidiary which resulted in the foreign exchange gain or loss from revaluation of the Intercompany Loan being recognized in other comprehensive income on a prospective basis. Prior to the second quarter of 2015, we had the intention to have the foreign subsidiary repay the Intercompany Loan and, as such, the foreign exchange fluctuations from the revaluation of the Intercompany Loan were recognized through foreign exchange gain or loss as part of net earnings.

Income tax expense (recovery)

Income tax expense was $1.1 million in 2015, compared to an income tax recovery of $1.3 million in 2014. The additional expense was due to higher earnings and the impact of a shift of earnings between jurisdictions. The recovery in 2014 was related to a combination of changes in deferred income tax assets and the release of a FASB Interpretation No. 48 provision which had become statute barred.

Net earnings (loss)

Net loss was $2.7 million in 2015, compared to net loss of $16.9 million in 2014. The decrease in the net loss reflects improved earnings from operations partially offset by higher income tax expenses.

Net loss in 2015 included stock-based compensation expense and related social taxes of $9.7 million and acquisition amortization of $9.7 million. Net loss in 2014 included stock-based compensation expense and related social taxes of $10.5 million and acquisition amortization of $10.9 million.

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Weighted average number of shares

The weighted average basic and diluted shares outstanding were 32.2 million for the year ended December 31, 2015 and 31.5 million for the year ended December 31, 2014.

The number of shares outstanding was 32.3 million at December 31, 2015, compared to 31.9 million at December 31, 2014. The increase in the number of shares outstanding was primarily due to the issuance of common shares as a result of stock option exercises.

Fiscal Year 2014 Compared to Fiscal Year 2013

Revenue

Revenue increased by $106.6 million, or 24.1%, in 2014, compared to 2013. The increase was largely driven by growth in OEM Solutions, with particular strength in 3G and 4G sales, including solid contributions from automotive, field services, energy, networking and mobile computing customers. In addition, there was strong contribution in Enterprise Solutions from the acquired In Motion products.

Our geographic revenue mix for the years ended December 31, 2014 and 2013 was as follows:

Gross margin

Gross margin was 32.6% of revenue in 2014, compared to 33.0% in 2013. The decrease in gross margin was primarily related to the increased volume of lower margin products sold by our OEM Solutions segment in 2014 compared to 2013. Gross margin improved sequentially throughout 2014 to 33.5% in the fourth quarter driven mainly by certain product cost reductions negotiated during the year. Gross margin included stock-based compensation expense and related social taxes of $0.6 million in 2014, compared to $0.4 million in 2013.

Sales and marketing

Sales and marketing expenses increased $8.3 million, or 19.7%, in 2014, compared to 2013 primarily due to the additional sales and marketing expenses from In Motion beginning in March 2014, as well as targeted investments in our go-to-market capability and higher incentive compensation due to higher revenues. Sales and marketing expenses included stock-based compensation and related social taxes of $2.2 million in 2014, compared to $1.9 million in 2013.

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Research and development

R&D expenses increased by $7.8 million, or 10.7%, in 2014, compared to 2013.  The increase in R&D expenses related primarily to additional costs associated with the acquired businesses of AnyData and In Motion along with the impact of lower R&D tax credits received in 2014 compared to 2013.

R&D expenses included stock-based compensation and related social taxes of $2.1 million in 2014, compared to $1.4 million in 2013.  R&D expenses also included acquisition amortization of $5.7 million in 2014, compared to $5.5 million in 2013.

Administration

Administration expenses increased by $1.9 million, or 5.3%, in 2014, compared to 2013, primarily due to additional expenses associated with the acquired AnyData and In Motion businesses and a specific bad debt provision. Administration expenses included stock-based compensation expense and related social taxes of $5.6 million in 2014, compared to $4.3 million in 2013.

Restructuring

Restructuring costs increased by $1.4 million in 2014, compared to 2013, primarily related to severance and benefit payments to employees impacted by the staff reductions related to the Company's decision to reduce the scope of 2G chipset development activities.

Acquisition-related and integration

Acquisition-related and integration costs increased by $2.1 million in 2014, compared to 2013, primarily reflecting the costs incurred to acquire and integrate In Motion into our operations and $0.6 million incurred through December 31, 2014 to acquire Maingate.

Impairment

In the second quarter of 2014, we made a decision to reduce the scope of 2G chipset development activities, which resulted in a $3.8 million impairment. Management evaluated the recoverability of costs and determined that the expected future cash flows were lower than the carrying value of the assets associated with this project. No such impairment was recorded in 2013.

Amortization

Amortization expense decreased by $3.0 million, or 25.0%, in 2014, primarily due to lower acquisition related amortization.  Amortization expense in 2014 included $5.2 million of acquisition amortization compared to $8.2 million in 2013.

Foreign exchange gain (loss)

Foreign exchange loss was $12.4 million in 2014, compared to a gain of $3.8 million in 2013.  Foreign exchange loss in 2014 includes an unrealized loss of $7.4 million on revaluation of an intercompany loan to a self-sustaining subsidiary, primarily driven by the decline in the Euro relative to the U.S. dollar. Foreign exchange gain in 2013 includes an unrealized gain of $2.7 million on revaluation of the intercompany loan.

Foreign exchange rate changes also impacted our Euro and Canadian dollar denominated revenue and operating expenses.  We estimate that net changes in exchange rates between 2014 and 2013 positively impacted our 2014 gross margin by approximately $0.4 million and our operating expenses by approximately $3.4 million.

Income tax expense (recovery)

Income tax recovery was $1.3 million in 2014, compared to an income tax expense of $1.6 million in 2013. The recovery in 2014 was related to a combination of changes in deferred income tax assets and the release of a FASB Interpretation No. 48 provision which had become statute barred.

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Net loss from continuing operations

Net loss from continuing operations increased by $1.3 million in 2014, compared to 2013.  The increase reflected an increase in foreign exchange loss partially offset by an increase in operating earnings and income tax recoveries.

Net loss from continuing operations in 2014 included stock-based compensation expense and related social taxes of $10.5 million and acquisition amortization of $10.9 million. Net loss from continuing operations in 2013 included stock-based compensation expense of $8.0 million and acquisition amortization of $13.7 million.

Net earnings (loss)

Net loss was $16.9 million in 2014, compared to net earnings of $55.0 million in 2013. The 2014 net loss includes after-tax foreign exchange losses compared to after-tax foreign exchange gains in 2013. Net earnings in 2013 includes the $70.2 million after-tax gain on sale of the AirCard business, combined with the absence of earnings from discontinued operations.

Weighted average number of shares

The weighted average basic and diluted number of shares outstanding was 31.5 million for the year ended December 31, 2014 and was 30.8 million for the year ended December 31, 2013.

The number of shares outstanding was 31.9 million at December 31, 2014, compared to 31.1 million at December 31, 2013. The increase in number of shares outstanding was primarily due to the issuance of common shares as a result of stock option exercises.

SEGMENTED INFORMATION

OEM Solutions

										% change
(in thousands of U.S. dollars, except where otherwise stated)	2015			2014			2013			2015 vs 2014		2014 vs 2013
Revenue	$	523,366		$	476,650		$	382,016		9.8	%	24.8	%
Cost of goods sold	371,559			336,132			266,867			10.5	%	26.0	%
Gross margin	$	151,807		$	140,518		$	115,149		8.0	%	22.0	%
Gross margin %	29.0		%	29.5		%	30.1		%

Fiscal Year 2015 compared to 2014

Revenue increased by $46.7 million, or 9.8%, in 2015, compared to 2014. This increase was primarily due to continued growth in sales of 3G and 4G products and solid contributions from automotive, energy and enterprise networking customers. Gross margin percentage modestly decreased in 2015 primarily due to an increase in sales to high volume but lower margin Automotive OEM customers and unfavorable foreign exchange rates, partially offset by product cost reductions on certain components.

Fiscal Year 2014 compared to 2013

Revenue increased by $94.6 million, or 24.8%, to $476.7 million in 2014, compared to 2013. This increase was due to solid contributions from automotive, field services, energy and mobile computing customers. Gross margin percentage decreased in 2014 primarily driven by customer mix within the OEM Solutions segment favoring high volume, lower margin customers, partially offset by product cost reductions.

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Enterprise Solutions

										% change
(in thousands of U.S. dollars, except where otherwise stated)	2015			2014			2013			2015 vs 2014		2014 vs 2013
Revenue	$	63,072		$	71,873		$	59,844		(12.2	)%	20.1	%
Cost of goods sold	29,945			33,412			29,352			(10.4	)%	13.8	%
Gross margin	$	33,127		$	38,461		$	30,492		(13.9	)%	26.1	%
Gross margin %	52.5		%	53.5		%	51.0		%

Fiscal Year 2015 compared to 2014

Revenue decreased by $8.8 million, or 12.2%, in 2015, compared to 2014.  The decrease was driven by lower sales of AirLink gateway products due to heightened competition and the impact on sales of a new product pipeline that had not yet been fully launched into the market. Gross margin percentage decreased in 2015, driven primarily by unfavorable product mix resulting from lower sales of higher margin gateway products and overall lower sales volume.

Fiscal Year 2014 compared to 2013

Revenue increased by $12.0 million, or 20.1%, to $71.9 million in 2014, compared to 2013.  The increase was driven by revenue contribution from the acquired In Motion business, partially offset by lower demand for AirLink products. Gross margin percentage improved in 2014, driven primarily by a combination of favorable product mix, including the acquired In Motion products, and lower product warranty costs compared to 2013.

Cloud and Connectivity Services

(in thousands of U.S. dollars, except where otherwise stated)	2015			2014			2013
Revenue	$	21,360		$	—		$	—
Cost of goods sold	12,439			—			—
Gross margin	$	8,921		$	—		$	—
Gross margin %	41.8		%	—		%	—		%

Cloud and Connectivity Services is a new reportable segment that was created following the implementation of a new organizational structure during 2015. The 2015 segment information reflects its operations for the entire year. We have not disclosed comparative information for this new segment as the operations related to Cloud and Connectivity Services that were formerly included in the Enterprise Solutions segment were not material prior to 2015. The segment comprises revenues derived from our cloud-based platform, our connectivity services and our managed wireless broadband services and includes the acquisitions of Maingate, Accel and MobiquiThings and our existing AirVantage cloud-based platform.

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FOURTH QUARTER OVERVIEW

Consolidated Results of Operations:

	Three months ended December 31,
(in thousands of U.S. dollars, except where otherwise stated)	2015				2014
			% of				% of
	$		Revenue		$		Revenue
Revenue	144,846		100.0	%	149,078		100.0	%
Cost of goods sold	99,783		68.9	%	99,072		66.5	%
Gross margin	45,063		31.1	%	50,006		33.5	%
Expenses
Sales and marketing	14,315		9.9	%	12,682		8.5	%
Research and development	18,539		12.8	%	21,012		14.1	%
Administration	9,393		6.5	%	9,008		6.0	%
Restructuring	201		0.1	%	540		0.4	%
Acquisition-related and integration	(616	)	(0.4	)%	1,273		0.9	%
Amortization	3,905		2.7	%	2,092		1.4	%
	45,737		31.6	%	46,607		31.3	%
Earnings (loss) from operations	(674	)	(0.5	)%	3,399		2.3	%
Foreign exchange loss	(1,398	)			(3,852	)
Other income (expense)	(16	)			246
Loss before income taxes	(2,088	)			(207	)
Income tax expense (recovery)	(1,705	)			1,494
Net loss	(383	)			(1,701	)
Net loss per share - Basic and diluted (in dollars)	(0.01	)			(0.05	)

GAAP:

• In the fourth quarter of 2015 revenue decreased by $4.2 million, or 2.8%, compared to the fourth quarter of 2014 primarily as a result of lower sales to certain customers in a number of segments within our OEM Solutions segment compared to the same period in 2014.

• Gross margin was 31.1% in the fourth quarter of 2015, compared to 33.5% in the fourth quarter of 2014. The decrease in gross margin in the fourth quarter of 2015 compared to the fourth quarter of 2014 is primarily attributable to an increase in sales to high volume but lower margin Automotive OEM customers and higher costs for a certain end of life component used in our legacy OEM products, combined with lower revenue from our higher margin Enterprise Solutions segment and unfavorable foreign exchange rates. This was partially offset by product cost reductions in certain other components and the addition of newly acquired wireless services revenue at above corporate average margins.

• Earnings from operations decreased by $4.1 million in the fourth quarter of 2015 compared to the fourth quarter of 2014 as a result of lower revenue and associated gross margin and higher operating expenses reflecting the acquired cost structure of the Maingate, Accel and MobiquiThings businesses and targeted investments in resources to support our go-to-market strategy, partially offset by the favorable impact of foreign exchange in the fourth quarter of 2015 compared to the fourth quarter of 2014.

• Net loss improved by $1.3 million in the fourth quarter of 2015, compared to the fourth quarter of 2014. Lower operating income in the fourth quarter of 2015 was partially offset by an income tax recovery and lower foreign exchange losses, which reduced the net loss compared to 2014.

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• Cash and cash equivalents at the end of the fourth quarter of 2015 were $93.9 million, an increase of $5.5 million compared to $88.3 million at the end of the third quarter of 2015. The increase was attributable to an increase in cash generated from operating activities of $13.1 million partially offset by purchases of shares for RSU distribution and capital expenditures.

NON-GAAP:

• Gross margin was 31.2% in the fourth quarter of 2015, compared to 33.6% in the fourth quarter of 2014.

• Earnings from operations decreased by $6.7 million compared to the fourth quarter of 2014.

• Adjusted EBITDA decreased by $6.4 million compared to the fourth quarter of 2014. This decrease reflects decreased revenue and decreased earnings growth in the fourth quarter of 2015.

• Net earnings decreased by $6.6 million, compared to the fourth quarter of 2014. This decrease was the result of lower operating profit in the fourth quarter of 2015.

• See "Non-GAAP Financial Measures".

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SUMMARY OF QUARTERLY RESULTS OF OPERATIONS

The following tables highlight selected financial information for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements for the year ended December 31, 2015.  The selected financial information presented below reflects all adjustments, consisting primarily of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of results for the interim periods.  These results are not necessarily indicative of results for any future period.  You should not rely on these results to predict future performance.

(in thousands of U.S. dollars, except where otherwise stated)	2015												2014
	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Revenue	$	144,846		$	154,581		$	157,965		$	150,406		$	149,078		$	143,270		$	135,012		$	121,163
Cost of goods sold	99,783			105,572			107,018			101,570			99,072			96,215			91,691			82,566
Gross margin	45,063			49,009			50,947			48,836			50,006			47,055			43,321			38,597
Gross margin %	31.1		%	31.7		%	32.3		%	32.5		%	33.5		%	32.8		%	32.1		%	31.9		%
Expenses
Sales and marketing	14,315			13,856			12,828			13,145			12,682			12,633			12,795			12,366
Research and development	18,539			17,987			18,402			19,092			21,012			19,887			20,021			20,017
Administration	9,393			9,416			11,092			10,420			9,008			9,006			9,680			9,333
Restructuring	201			39			711			—			540			71			987			—
Acquisition-related and integration	(616		)	443			1,015			1,103			1,273			356			71			970
Impairment	—			—			—			—			—			—			3,756			—
Amortization	3,905			3,066			2,787			2,602			2,092			2,159			2,275			2,583
	45,737			44,807			46,835			46,362			46,607			44,112			49,585			45,269
Earnings (loss) from operations	(674		)	4,202			4,112			2,474			3,399			2,943			(6,264		)	(6,672		)
Foreign exchange gain (loss)	(1,398		)	(102		)	1,550			(11,893		)	(3,852		)	(8,039		)	(891		)	392
Other income (expense)	(16		)	13			13			105			246			317			265			26
Earnings (loss) before income taxes	(2,088		)	4,113			5,675			(9,314		)	(207		)	(4,779		)	(6,890		)	(6,254		)
Income tax expense (recovery)	(1,705		)	827			1,599			339			1,494			(1,875		)	1,353			(2,249		)
Net earnings (loss)	$	(383	)	$	3,286		$	4,076		$	(9,653	)	$	(1,701	)	$	(2,904	)	$	(8,243	)	$	(4,005	)
Earnings (loss) per share - GAAP in dollars
Basic	$	(0.01	)	$	0.10		$	0.13		$	(0.30	)	$	(0.05	)	$	(0.09	)	$	(0.26	)	$	(0.13	)
Diluted	$	(0.01	)	$	0.10		$	0.12		$	(0.30	)	$	(0.05	)	$	(0.09	)	$	(0.26	)	$	(0.13	)
Weighted average number of shares (in thousands)
Basic	32,282			32,231			32,166			31,983			31,759			31,582			31,466			31,235
Diluted	32,282			32,823			32,915			31,983			31,759			31,582			31,466			31,235

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Our quarterly results may fluctuate from quarter-to-quarter, driven by variation in sales volume, product mix and the combination of variable and fixed operating expenses.  The impact of significant items incurred during the first three interim periods of the year ended December 31, 2015 are discussed in more detail and disclosed in our quarterly reports and management’s discussion and analysis.  Factors that affected our quarterly results in 2015 are listed below.

• In the first quarter of 2015, net loss increased $7.9 million, or $0.25 per common share, to a net loss of $9.7 million, compared to the fourth quarter of 2014. The increase in the net loss was largely related to lower gross margin and higher foreign exchange losses partially offset by lower income tax expenses in the first quarter of 2015.

• In the second quarter of 2015, net earnings increased by $13.7 million, or $0.42 per common share, compared to net earnings of $4.1 million, in the first quarter of 2015 mainly driven by higher revenue and associated gross margin, as well as a $1.6 million foreign exchange gain in the second quarter of 2015 compared to a $11.9 million foreign exchange loss in the first quarter of 2015.

• In the third quarter of 2015, net earnings decreased by $0.8 million, or $0.02 per common share, compared to net earnings of $3.3 million, in the second quarter of 2015, driven by a combination of lower revenue and gross margin, as well as higher foreign exchange losses partially offset by lower operating expenses and lower income tax expenses.

• In the fourth quarter of 2015, net loss increased by $3.7 million, or $0.11 per common share, to a loss of $0.4 million, compared to the third quarter of 2015, primarily due to a lower revenue and gross margin, higher operating expenses and higher foreign exchange loss, partially offset by an income tax recovery.

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LIQUIDITY AND CAPITAL RESOURCES

Selected Financial Information:

(in thousands of U.S. dollars)	2015			2014			2013
Cash flows provided before changes in non-cash working capital:	$	29,089		$	27,380		$	13,257
Changes in non-cash working capital
Accounts receivable	(8,437		)	(5,180		)	10,897
Inventories	(16,262		)	(8,949		)	11,908
Prepaid expense and other	(5,748		)	25,421			(7,254		)
Accounts payable and accrued liabilities	16,342			10,538			(13,139		)
Deferred revenue and credits	(451		)	(510		)	1,147
	(14,556		)	21,320			3,559
Cash flows provided by (used in):
Operating activities	$	14,533		$	48,700		$	16,816
Investing activities	$	(127,969	)	$	(22,336	)	$	98,754
Acquisitions	(112,895		)	(23,853		)	(5,196		)
Net proceeds from sale of AirCard business	—			13,800			119,958
Capital expenditures and increase in intangible assets	(15,079		)	(10,829		)	(13,570		)
Net change in short-term investments and other assets	—			(1,584		)	(2,470		)
Financing activities	$	(3,047	)	$	22		$	(925	)
Issue of common shares	3,837			6,404			8,106
Repurchase of common shares for cancellation	—			—			(5,772		)
Purchase of treasury shares for RSU distribution	(6,584		)	(5,955		)	(3,433		)
Free Cash Flow (1)	$	(546	)	$	37,871		$	3,246

(1) See "Non-GAAP Financial Measures".

Operating Activities

Cash provided by operating activities decreased by $34.2 million year-over-year, primarily due to higher working capital requirements in 2015 due to purchases of an end of life component to be used in our legacy OEM products and prepayment of an intellectual property license. Favorable working capital requirements in 2014 were driven by the reduction of required inventory prepayments as a result of improved commercial terms from one of our contract manufacturers.

Investing Activities

Cash used in investing activities increased by $105.6 million in 2015 and was primarily the result of the acquisitions of Maingate, Accel and MobiquiThings and increased capital expenditures compared to 2014. Cash used in 2014 was mainly related to the acquisition of In Motion and capital expenditures offset by the receipt of escrow funds related to the sale of the Aircard business.

Cash used for the purchase of capital equipment was primarily for production and tooling equipment, research and development equipment, and computer equipment & software, while cash used for intangible assets was driven primarily by patent registration costs and software licensing costs.

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Financing Activities

Cash used in financing activities increased $3.1 million year-over-year, primarily due to the reduced issuance of common shares which provided an additional $2.6 million in 2014 and higher spending on purchases of common shares to satisfy obligations under our restricted share unit plan in 2015.

Free Cash Flow

Our free cash flow for 2015 was negative $0.5 million compared to $37.9 million in 2014. This decrease was a result of lower operating cash flow and higher capital expenditures in 2015 compared to 2014.

Cash Requirements

Our near-term cash requirements are primarily related to funding our operations, capital expenditures, intellectual property (“IP”) licenses, and other obligations discussed below.  We continue to believe that our cash and cash equivalents of $93.9 million at December 31, 2015 and cash generated from operations will be sufficient to fund our expected working capital requirements for at least the next twelve months. Our capital expenditures during the first quarter of 2016 are expected to be primarily for factory test equipment, R&D equipment, tooling, leasehold improvements, software licenses and patents.  However, we cannot be certain that our actual cash requirements will not be greater than we currently expect.

The following table presents the aggregate amount of future cash outflows for contractual obligations as of December 31, 2015.

Payments due by period (In thousands of dollars)	Total		2016		2017		2018		2019		2020		Thereafter
Operating lease obligations	$	21,378	$	5,224	$	4,815	$	3,735	$	3,099	$	2,527	$	1,978
Capital lease obligations	517		212		156		101		44		4		—
Purchase obligations (1)	87,631		87,631		—		—		—		—		—
Acquisition contingent consideration (2)	502		9		195		298		—		—		—
Other long-term liabilities (3)	44,065		—		—		—		—		—		—
Total	$	154,093	$	93,076	$	5,166	$	4,134	$	3,143	$	2,531	$	1,978

⁽¹⁾ Purchase obligations represent obligations with certain contract manufacturers to buy a minimum amount of designated products between January 2016 and June 2016.  In certain of these arrangements, we may be required to acquire and pay for such products up to the prescribed minimum or forecasted purchases.

⁽²⁾ Acquisition contingent consideration relates to expected payments to be made under the performance-based earnout formulas for the MobiquiThings acquisition. The obligation include the portion recognized as purchase price consideration and do not reflect the effect of discount rates.

⁽³⁾ Other long-term liabilities include the long-term portions of accrued royalties which because of their contingent nature are not directly attributable to any specific time period .

Normal Course Issuer Bid

On February 4, 2016, we received approval from the TSX of our Notice of Intention to make a Normal Course Issuer Bid (the "Bid"). Pursuant to the Bid, we may purchase for cancellation up to 3,149,199 of our common shares, or approximately 9.7% of the common shares outstanding as of the date of the announcement. The Bid commenced on February 9, 2016 and will terminate on the earlier of: (i) February 8, 2017, (ii) the date the Company completes its purchases pursuant to the notice of intention filed with the TSX, or (iii) the date of notice by the Company of termination of the Bid. As of February 29, 2016, we had purchased 549,583 common shares at an average price of $11.18 per share.

On February 29, 2016, we established an automatic share purchase plan in connection with the previously announced Bid with a designated broker to allow for the purchase of Common Shares under the NCIB at times when the Company would ordinarily not be permitted to purchase shares due to regulatory restrictions.

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Capital Resources

The source of funds for our future capital expenditures and commitments includes cash, accounts receivables, cash from operations and borrowings under our credit facilities.

	2015								2014
(In thousands of dollars)	Dec 31		Sept 30		June 30		Mar 31		Dec 31		Sept 30		June 30		Mar 31
Cash and cash equivalents	$	93,936	$	88,369	$	96,474	$	99,555	$	207,062	$	196,086	$	168,418	$	151,339
Unused credit facilities	10,000		10,000		10,000		10,000		10,000		10,000		10,000		10,000
Total	$	103,936	$	98,369	$	106,474	$	109,555	$	217,062	$	206,086	$	178,418	$	161,339

Credit Facilities

We have a $10 million revolving term credit facility ("the Revolving Facility") with Toronto Dominion Bank and the Canadian Imperial Bank of Commerce. The term of the Revolving Facility has been extended to January 31, 2017. The Revolving Facility is for working capital requirements, is secured by a pledge against all of our assets and is subject to borrowing base limitations. As at December 31, 2015, there were no borrowings under the Revolving Facility.

Letters of Credit

We have access to a revolving standby letter of credit facility of $10 million from Toronto Dominion Bank. The credit facility is used for the issuance of letters of credit for project related performance guarantees and is guaranteed by Export Development Canada. As of December 31, 2015, there were no letters of credit issued against the revolving standby letter of credit facility.

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NON-GAAPFINANCIALMEASURES

Our consolidated financial statements are prepared in accordance with U.S. GAAP on a basis consistent for all periods presented.  In addition to results reported in accordance with U.S. GAAP, we use non-GAAP financial measures as supplemental indicators of our operating performance.  The term “non-GAAP financial measure” is used to refer to a numerical measure of a company’s historical or future financial performance, financial position or cash flows that: (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in a company’s statement of earnings, balance sheet or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Our non-GAAP financial measures include non-GAAP gross margin, non-GAAP earnings (loss) from operations, Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), non-GAAP net earnings (loss), non-GAAP diluted earnings (loss) per share and free cash flow.  Non-GAAP results exclude the impact of stock-based compensation expense and related social taxes, amortization related to acquisitions, acquisition-related and disposition costs, restructuring costs, integration costs, impairment, foreign exchange gains or losses on translation of balance sheet accounts and certain tax adjustments. We disclose non-GAAP financial measures as we believe they provide useful information to evaluate our operating results, for financial and operational decision-making purposes and to assist in comparisons from one period to another.  Readers are cautioned that non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to similar measures presented by other companies.  We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure. We therefore believe that despite these limitations, it is appropriate to supplement the U.S. GAAP measures with certain non-GAAP measures defined in this section of our MD&A.

Adjusted EBITDA is defined as earnings (loss) from operations plus stock-based compensation and related social taxes, acquisition-related and integration costs, restructuring costs, impairment and amortization. Adjusted EBITDA can also be calculated as non-GAAP earnings (loss) from operations plus amortization excluding acquisition related amortization. We believe that Adjusted EBITDA is an important indicator of our operating performance and our ability to generate liquidity through operating cash flow that will fund future working capital needs and fund future capital expenditures. Adjusted EBITDA is also used by investors and analysts for valuation purposes. Free cash flow is defined as cash flow from operating activities less capital expenditures and increases in intangibles. We believe that disclosure of free cash flow provides a good measure of our ability to generate cash that can be used for expansion of the business.

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The following table provides a reconciliation of the non-GAAP financial measures to our most directly comparable U.S. GAAP results for years ended December 31:

(in thousands of U.S. dollars, except where otherwise stated)	2015			2014			2013
Gross margin - GAAP	$	193,855		$	178,979		$	145,641
Stock-based compensation and related social taxes	647			555			406
Gross margin - Non-GAAP	$	194,502		$	179,534		$	146,047
Earnings (loss) from operations - GAAP	$	10,114		$	(6,594	)	$	(17,664	)
Stock-based compensation and related social taxes	9,685			10,464			7,990
Acquisition-related and integration	1,945			2,670			535
Restructuring	951			1,598			171
Impairment	—			3,756			280
Acquisition related amortization	9,666			10,900			13,741
Earnings from operations - Non-GAAP	$	32,361		$	22,794		$	5,053
Amortization (excluding acquisition related amortization)	10,550			12,617			13,649
Adjusted EBITDA	$	42,911		$	35,411		$	18,702
Net loss from continuing operations - GAAP	$	(2,674	)	$	(16,853	)	$	(15,550	)
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration, and acquisition related amortization, net of tax	22,063			29,337			22,620
Unrealized foreign exchange loss (gain)	11,596			12,285			(3,912		)
Income tax adjustments	(5,211		)	(4,921		)	3,784
Net earnings from continuing operations - Non-GAAP	$	25,774		$	19,848		$	6,942
Net earnings from discontinued operations - GAAP	$	—		$	—		$	70,588
Stock-based compensation and disposition costs	—			—			4,014
Gain on sale of AirCard business	—			—			(70,182		)
Net earnings from discontinued operations - Non-GAAP	$	—		$	—		$	4,420
Net earnings (loss) - GAAP	$	(2,674	)	$	(16,853	)	$	55,038
Net earnings (loss) - Non-GAAP	25,774			19,848			11,362
Diluted earnings (loss) from continuing operations per share
GAAP - (in dollars)	$	(0.08	)	$	(0.53	)	$	(0.50	)
Non-GAAP - (in dollars)	$	0.80		$	0.63		$	0.23
Net earnings (loss) per share - diluted
GAAP - (in dollars)	$	(0.08	)	$	(0.53	)	$	1.79
Non-GAAP - (in dollars)	$	0.80		$	0.63		$	0.37

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The following table provides a quarterly reconciliation of the non-GAAP financial measures to our most directly comparable U.S. GAAP results: 

	2015												2014
(in thousands of U.S. dollars, except where otherwise stated)	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Gross margin - GAAP	$	45,063		$	49,009		$	50,947		$	48,836		$	50,006		$	47,055		$	43,321		$	38,597
Stock-based compensation and related social taxes	106			146			147			248			131			134			130			160
Gross margin - Non-GAAP	$	45,169		$	49,155		$	51,094		$	49,084		$	50,137		$	47,189		$	43,451		$	38,757
Earnings (loss) from operations - GAAP	$	(674	)	$	4,202		$	4,112		$	2,474		$	3,399		$	2,943		$	(6,264	)	$	(6,672	)
Stock-based compensation and related social taxes	1,670			2,557			2,858			2,600			2,432			2,402			2,326			3,304
Acquisition-related and integration	(616		)	443			1,015			1,103			1,273			356			71			970
Restructuring	201			39			711			—			540			71			987			—
Impairment	—			—			—			—			—			—			3,756			—
Acquisition related amortization	2,734			2,234			2,029			2,669			2,389			2,609			2,784			3,118
Earnings (loss) from operations - Non-GAAP	$	3,315		$	9,475		$	10,725		$	8,846		$	10,033		$	8,381		$	3,660		$	720
Amortization (excluding acquisition related amortization)	3,030			2,635			2,423			2,462			2,699			3,400			3,153			3,365
Adjusted EBITDA	$	6,345		$	12,110		$	13,148		$	11,308		$	12,732		$	11,781		$	6,813		$	4,085
Net earnings (loss) - GAAP	$	(383	)	$	3,286		$	4,076		$	(9,653	)	$	(1,701	)	$	(2,904	)	$	(8,243	)	$	(4,005	)
Stock-based compensation and related social taxes, restructuring, impairment, acquisition-related, integration, and acquisition related amortization, net of tax	4,016			5,232			6,443			6,372			6,618			5,414			9,916			7,389
Unrealized foreign exchange loss (gain)	1,393			(51		)	(1,581		)	11,835			3,798			7,953			916			(382		)
Income tax adjustments	(2,490		)	(1,048		)	(301		)	(1,372		)	378			(2,781		)	1			(2,519		)
Net earnings (loss) - Non-GAAP	$	2,536		$	7,419		$	8,637		$	7,182		$	9,093		$	7,682		$	2,590		$	483
Diluted earnings (loss) per share
GAAP - (in dollars)	$	(0.01	)	$	0.10		$	0.12		$	(0.30	)	$	(0.05	)	$	(0.09	)	$	(0.26	)	$	(0.13	)
Non-GAAP - (in dollars)	$	0.08		$	0.23		$	0.26		$	0.22		$	0.29		$	0.24		$	0.08		$	0.02

Free Cash Flow:

(in thousands of U.S. dollars)	2015			2014			2013
Cash flows from operating activities	$	14,533		$	48,700		$	16,816
Capital expenditures and increase in intangible assets	(15,079		)	(10,829		)	(13,570		)
Free Cash Flow	$	(546	)	$	37,871		$	3,246

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any off-balance sheet arrangements during the years ended December 31, 2015 and 2014.

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TRANSACTIONS BETWEEN RELATED PARTIES

We did not undertake any transactions with related parties during the years ended December 31, 2015 and 2014.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial statements in accordance with U.S. GAAP and we make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosure of contingent liabilities.  Note 2, Summary of significant accounting policies, in the December 31, 2015 consolidated financial statements includes a summary of the significant accounting policies used in the preparation of our consolidated financial statements.  While all of the significant accounting policies are important to the annual consolidated financial statements, some of these policies may be viewed as involving a high degree of judgment.

On an ongoing basis, we evaluate our estimates and judgments, including those related to business combinations, revenue recognition, adequacy of allowance for doubtful accounts, adequacy of inventory reserve, valuation of goodwill and intangible assets, income taxes, useful lives of long-lived assets, adequacy of warranty reserve, royalty obligations, contingencies, stock-based compensation, and fair value measurement.  We base our estimates on historical experience, anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances.  By their nature, estimates are subject to an inherent degree of uncertainty.  Actual results could differ materially from our estimates.

The following critical accounting policies require management’s most difficult, subjective and complex judgments, and are subject to measurement uncertainty.

Business combinations

We account for our business combinations using the acquisition method.  Under this method, estimates we make to determine the fair values of acquired assets and liabilities assumed include judgments in our determinations of acquired intangible assets and assessment of the fair value of existing property and equipment.  Assumed liabilities can include litigation and other contingency reserves existing at the time of the acquisition.  Goodwill is recognized as of the acquisition date as the excess of the fair value of consideration transferred over the estimated fair values of net identifiable assets acquired and liabilities assumed at their acquisition date.  Acquisition related expenses are separately recognized from business combination and are expensed as incurred.

When establishing fair values, we make significant estimates and assumptions, especially with respect to intangible assets.  Intangible assets acquired and recorded by us may include patents, intellectual property, customer relationships, brand, backlog and in-process research and development.  Estimates include but are not limited to the forecasting of future cash flows and discount rates.  From time to time, we may engage third-party firms to assist us in determining the fair value of assets and liabilities assumed.  Our estimates of fair values are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.  As a result, actual results may differ from estimates impacting our earnings.

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Revenue recognition

We recognize revenue from sales of products and services upon the later of transfer of title or upon shipment of the product to the customer or rendering of the service, so long as persuasive evidence of an arrangement exists, delivery has occurred, price is fixed or determinable, and collection is reasonably assured. Customers include resellers and distributors, OEMs, mobile network operators, other enterprises and public sector entities. We record deferred revenue when we receive cash in advance of the revenue recognition criteria being met.  A significant portion of our revenue is generated from sales to resellers.  We recognize revenue on the portion of sales to certain resellers that are subject to contract provisions allowing various rights of return and stock rotation, upon the earlier of when the rights have expired or the products have been reported as sold by the resellers.  Revenues from contracts with multiple-element arrangements, such as those including technical support services, are recognized as each element is earned based on the relative fair value of each element and only when there are no undelivered elements that are essential to the functionality of the delivered elements.  Revenue from licensed software is recognized at the inception of the license term.  Revenue from software maintenance, unspecified upgrades and technical support contracts is recognized over the period such items are delivered or services are provided.  Technical support contracts extending beyond the current period are recorded as deferred revenue and amortized into income over the applicable earning period.

Funding from certain research and development agreements is recognized as revenue when certain criteria stipulated under the terms of those funding agreements have been met and when there is reasonable assurance the funding will be received. Certain research and development funding may be repayable on the occurrence of specified future events. We recognize the liability to repay research and development funding in the period in which conditions arise that would cause research and development funding to be repayable. Government research and development arrangements are recognized as a reduction of the related expense when the criteria stipulated under the terms of the agreements have been met and when there is reasonable assurance the funding will be received.

Allowance for doubtful accounts

We maintain an allowance for doubtful accounts for estimated losses that may arise if any of our customers are unable to make required payments.  We consider the following factors when determining whether collection is reasonably assured:  customer credit-worthiness, past transaction history with the customer, insured amounts, if any, current economic industry trends and changes in customer payment terms.  If we have no previous experience with the customer, we typically obtain reports from credit organizations to ensure that the customer has a history of paying its creditors.  We may also request financial information, including financial statements, to ensure that the customer has the means of making payment.  If these factors indicate collection is not reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash.  If the financial condition of any of our customers deteriorates, we may increase our allowance.

As at December 31, 2015, accounts receivable comprised 21.3% of total assets.  Included in this balance was a provision of $2.1 million for doubtful accounts, or 1.8% of accounts receivable compared to $2.3 million for doubtful accounts, or 2.1% of accounts receivable as at December 31, 2014.  We believe our allowance for doubtful accounts as at December 31, 2015 is adequate to provide for probable losses existing in accounts receivable.

Inventory

We value our inventory at the lower of cost, determined on a first-in-first-out basis, and estimated net realizable value. We assess the need for an inventory write-down and/or an accrual for estimated losses on inventory purchase commitments based on our assessment of estimated market value using assumptions about future demand and market conditions. Our reserve requirements generally increase as our projected demand requirements decrease, due to market conditions, technological and product life cycle changes and longer than

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previously expected usage periods.  If market conditions are worse than our projections, we may further write-down the value of our inventory or increase the accrual for estimated losses on inventory purchase commitments.

Goodwill and intangible assets

Goodwill and intangible assets are assessed for impairment on an annual basis and between annual tests whenever circumstances indicate that the carrying value of the goodwill and intangible assets might be impaired. We performed our annual test on September 30, 2015. Circumstances may include an adverse change in business climate or a more likely than not expectation that a reporting unit will be sold or disposed. On at least a quarterly basis, we assess whether such circumstances exist. An evaluation of recoverability of goodwill requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the estimated fair value of each reporting unit. Significant judgments that are required on our part to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates, consideration of appropriate control premium, market conditions, and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit and may result in impairment charges in future periods.

At December 31, 2015, our goodwill balance was $156.5 million.  We determined that there was no impairment as the fair values of each of our reporting units exceeded their respective carrying values as at September 30, 2015.  Our analysis took into consideration an income valuation approach using the expected discounted cash flows for each reporting unit. The principal factors used in the discounted cash flow analysis were the projected results of operations, the discount rate based on our estimated weighted average cost of capital, and terminal value assumptions for each reporting unit.  The discounted cash flow model used was based on our business plan, as approved by our Board of Directors.  For years subsequent to those contained in our business plan, we analyzed third party forecasts and other macro-economic indicators that impact our reporting units to provide a reasonable estimate of revenue growth in future periods.  Our gross margins and operating expense estimates were consistent with those generated in recent historical periods.  We also developed assumptions for the amount of working capital and capital expenditures needed to support each reporting unit.

We implemented a new organization structure that resulted in three reportable segments effective October 1, 2015.  Accordingly, we reassigned goodwill using a relative fair value allocation approach and updated our goodwill valuation analysis. There was no impairment of goodwill during the years ended December 31, 2015, 2014 and 2013.

In addition to the income valuation approach noted above, we also considered our current market capitalization, which was approximately $509.0 million at December 31, 2015 and exceeds our book value of $358.3 million.

Income taxes

We recognize and measure each tax position related to income tax positions taken or expected to be taken in a tax return.  We have reviewed our tax positions to determine which should be recognized and measured according to the more likely than not threshold requirement.  The tax benefits recognized in the financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.  If the realization of a tax position is not considered more likely than not, we provide for a valuation allowance. The ultimate realization of our deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. We consider projected future taxable income from continuing operations, tax planning strategies and transactions in making our assessment. If our assessment of our ability to realize our deferred tax assets changes, we may make an adjustment to our deferred tax assets that would be charged to income (loss).

We do not provide for taxes on foreign earnings as it is our intention to indefinitely reinvest undistributed earnings of our foreign subsidiaries.  It is not practical to estimate the income tax liability that might be incurred if there is a change in management’s intention in the event that a remittance of such earnings occurs in the future.

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The ultimate amount of future income taxes and income tax provision could be materially different from those recorded, as it is influenced by our future operating results and our tax interpretations.

Amortization

Amortization of property and equipment and intangible assets incorporates estimates of useful lives and residual values. These estimates may change as more experience is obtained or as general market conditions change impacting the operation of property and equipment and intangible assets.

Warranty costs

We accrue product warranty costs in accrued liabilities to provide for the repair or replacement of defective products.  Our accrual is based on an assessment of historical experience, product quality and management’s estimates.  If there is a change in these factors, we adjust our accrual accordingly.

Royalty obligations

Under certain license agreements we are committed to royalty payments based on the sales of products using certain technologies.  We recognize royalty obligations as determinable in accordance with agreement terms.  Where agreements are not finalized, we have recognized our current best estimate of the obligation in accrued liabilities and other long-term liabilities.  When the agreements are finalized, the estimates are revised accordingly.

Contingencies

We are from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of our business.  We accrue for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  Significant judgment is required in both the determination of probability and the determination as to whether an amount of a loss is reasonably estimable. These accruals are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and technical experts and other information and events pertaining to the particular matter.  To the extent there is a reasonable possibility (within the meaning of ASC 450, Contingencies) that the losses could exceed the amounts already accrued, management believes that the amount of any such additional loss would not be material to our results of operations or financial condition.

In some instances, we are unable to reasonably estimate any potential loss or range of loss.  The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on the company. There are many reasons why we cannot make these assessments, including, among others, one or more of the following: in the early stage of a proceeding, the claimant is not required to specifically identify the patent that has allegedly been infringed; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery not having been started or being incomplete; the complexity of the facts that are in dispute (e.g., once a patent is identified, the analysis of the patent and a comparison to our activities is a labour-intensive and highly technical process); the difficulty of assessing novel claims; the parties not having engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and the often slow pace of patent litigation.

We are required to apply judgment with respect to any potential loss or range of loss in connection with litigation.  While we believe we have meritorious defenses to the claims asserted against us in our currently outstanding litigation, and intend to defend ourselves vigorously in all cases, in light of the inherent uncertainties in litigation there can be no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by us for those cases for which an estimate can be made.  Losses in connection with any litigation for which we are not presently able to reasonable estimate any potential loss or range of loss could be material to our results of operations and financial condition. 

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Stock-based compensation

We recognize stock-based compensation expense for all stock-based compensation awards based on the fair value at grant date. We recognize stock-based compensation expense for those shares expected to vest on a straight-line basis over the requisite service period of the award.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires subjective assumptions. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Fair value measurement

We measure our short-term investments at fair value, defined as the price that would be received from selling an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining fair value measurements, we consider the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of non-performance.

An established fair value hierarchy requires the company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is both available and significant to the fair value measurement.  Three levels of inputs may be used to measure fair value as detailed below.

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Inputs that are generally unobservable and are supported by little or no market activity and that are significant to the fair value determination of the assets or liabilities.

The determination of fair value requires judgments, assumptions and estimates and may change over time.

OUTSTANDING SHARE DATA

As of the date of this MD&A, we had 32,121,578 common shares issued and outstanding, stock options exercisable into 1,533,163 common shares at a weighted average exercise price of $13.68 and 443,724 restricted treasury share units outstanding.

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IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING CURRENT PERIOD

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The standard is effective for fiscal years beginning after December 15, 2015. Early application is permitted. We elected to early adopt this standard in the fourth quarter of 2015. During the fourth quarter of 2015, we made adjustments to the amounts previously recorded on the 2015 acquisitions of Wireless Maingate AB, Accel Networks LLC, and MobiquiThings SAS.

IMPACT OF ACCOUNTING PRONOUNCEMENTS AFFECTING FUTURE PERIODS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The update is intended to clarify the principles of recognizing revenue, and to develop a common revenue standard for U.S. GAAP and IFRS that would remove inconsistencies in revenue requirements, leading to improved comparability of revenue recognition practices across entities and industries. ASC 606 contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much, and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard is effective for annual and interim financial statements for fiscal years beginning after December 15, 2017. Early application is permitted in fiscal years beginning after December 15, 2016. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The update provides guidance about management's responsibility in evaluating whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Given our financial condition, we do not expect the update to have a significant impact on our disclosures.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The update provides accounting guidance for customers with cloud computing arrangements. The standard is effective for interim and annual periods ending after December 15, 2015. Early application is permitted. This update does not have a material impact on our financial statements and business.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The update provides that an entity should measure inventory within the scope of the standard at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard is effective for interim and annual periods ending after December 15, 2016 and applied prospectively. Early application is permitted. We do not expect this update to have a material impact on our financial statements and business.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The standard is effective for interim and annual periods ending after December 15, 2016. Early application is permitted. Other than the revised presentation of deferred tax liabilities and assets from current to noncurrent, we do not expect this update to have an impact on our financial statements and business.

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In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update is to improve transparency and comparability among organizations by requiring lessees to recognize right-of-use assets and lease liabilities on the balance sheet and requiring additional disclosure about leasing arrangements. The standard is effective for fiscal years beginning after December 15, 2018. Early application is permitted. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

DISCLOSURE CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures for the Company.  Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed with securities regulatory authorities is recorded, processed, summarized and reported within time periods specified in applicable securities regulations, and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted an evaluation of the effectiveness of our disclosure controls and procedures, which was carried out under the supervision of, and with the participation of, our management, including our Chief Executive Officer and our Chief Financial Officer, as of December 31, 2015.  Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2015 to ensure that information required to be disclosed by us in the reports we file or submit under applicable securities laws and regulations is recorded, processed, summarized, and reported within the time periods specified thereby.

We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. Control procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedures are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. We considered these limitations during the development of our disclosure controls and procedures and will periodically re-evaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934 and has designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding

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prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2015, based on the framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was effective as of that date.

KPMG LLP (“KPMG”), an independent registered public accounting firm, who audited and reported on our consolidated financial statements as at and for the year ended December 31, 2015, has issued an attestation report on our internal control over financial reporting as of December 31, 2015.  Their attestation report is included with our consolidated financial statements.

There were no changes in our internal control over financial reporting during the year ended December 31, 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

LEGAL PROCEEDINGS

In February 2015, a patent holding company, Wetro Lan, filed a patent infringement lawsuit in the United States District Court for the Eastern District of Texas, asserting patent infringement by us of one patent which expired in 2012. The lawsuit makes certain allegations concerning our AirLink router products which were sold prior to the patent’s expiry. The lawsuit was dismissed with prejudice in the fourth quarter of 2015 and did not have a material impact on our operating results.

On January 6, 2014, we received notice from the International Chamber of Commerce ("ICC") of arbitration proceedings launched by Nokia against us, for alleged unpaid royalties of approximately €32 million. On November 24, 2015, following a hearing, we received notice from the ICC of a decision in our favour in the proceedings.

In January 2012, a patent holding company, M2M Solutions LLC ("M2M"), filed a patent infringement lawsuit in the United States District Court for the District of Delaware asserting patent infringement by us and our competitors. The lawsuit makes certain allegations concerning the AirPrime embedded wireless module products, related AirLink products and related services sold by us for use in M2M communication applications. The claim construction order has determined one of the two patents-in-suit to be indefinite and therefore invalid. A motion for summary judgment of non-infringement and invalidity has been filed by us and a decision is currently pending. We anticipate that M2M will not proceed with its infringement case against us, but will eventually appeal the claim construction order. Trials against two other defendants in related cases involving the same patents are scheduled for March and April 2016, respectively. Any appeals from the claim construction order may follow the disposition of these trials. In August 2014, M2M filed a second patent infringement lawsuit against us in the same court with respect to a recently issued patent held by M2M, which patent is a continuation of one of the patents-in-suit in the original lawsuit filed against us by M2M. The lawsuit has been administratively closed pending the result of several Inter Partes Review proceedings filed by us and the other defendants with the United States Patent and

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Trial Appeal Board (PTAB) in August and October of 2015. The PTAB has declined to institute proceedings in respect of the first two of these filings and has yet to make a determination on the remaining three filings, including ours.

Although there can be no assurance that an unfavorable outcome would not have a material adverse effect on our operating results, liquidity or financial position, we believe the claims made in the foregoing legal proceedings are without merit and intend to defend ourselves and our products vigorously in all cases.

IP Indemnification Claims

We have been notified by one or more of our customers in each of the following matters that we may have an obligation to indemnify them in respect of the products we supply to them:

In May 2013, a patent holding company, Adaptix, Inc., filed a patent infringement lawsuit in the United States District Court for the Eastern District of Texas against one of our customers asserting patent infringement in relation to our customer’s products, which may include certain LTE products which utilize modules sold to them by us. In March 2014, the lawsuit was transferred to the United States District Court for the Northern District of California. The lawsuit was dismissed with prejudice in June 2015 and we do not believe that this outcome will have a material adverse effect on our operating results. In June 2015, Adaptix filed amended complaints in the Eastern District of Texas against two carriers asserting patent infringement against them in relation to certain cellular communication devices sold by the carriers for use on their 4G LTE wireless networks, which products include certain products which may utilize modules sold to the original equipment manufacturer by us and certain AirCard products sold to the carriers by us prior to the transfer of the AirCard business to Netgear. The two cases have been consolidated and the claim construction hearing is scheduled for July 2016, with the first trial for the consolidated cases to occur in May 2017.

In February 2012, a patent holding company, Intellectual Ventures (comprised of Intellectual Ventures I LLC and Intellectual Ventures II LLC), filed a patent infringement lawsuit in the United States District Court for the District of Delaware against two of our customers asserting patent infringement in relation to several of our customer's products and services, including the mobile hotspots sold to them by us prior to the transfer of the AirCard business to Netgear. The lawsuit was split into several separate lawsuits and amended complaints were filed in October 2013. We are currently intervening in two of the cases in defense of our products with respect to one patent-in-suit alleged to relate to Wi-Fi standards. The lawsuits are in the discovery stage. A claim construction order was issued in March 2015.

A patent holding company, Eon Corp. IP Holdings, LLC ("Eon"), filed a patent infringement lawsuit against one of our customers in October 2010 in the United States District Court for the Eastern District of Texas, which was subsequently transferred to the United States District Court for the Northern District of California. The lawsuit involves assertions of patent infringement in relation to wireless modems sold to our customer by us prior to the transfer of the AirCard business to Netgear. A claim construction order was issued in July 2013, and the defendant's motion for summary judgment of non-infringement was granted by the Court in March 2014. In March 2015, this judgment was affirmed by the United States Court of Appeals for the Federal Circuit. Eon filed a patent litigation lawsuit against another of our former AirCard customers in January 2012 in the United States District Court for the District of Puerto Rico involving the same patent-in-suit in the California lawsuit plus three additional patents. This lawsuit was transferred in part to the District of Delaware with respect to claims related to one of the four patents-in-suit, which claims related to interactive television. The Delaware case has since been closed. The claim construction order in the Puerto Rico case was issued in April 2014. The case was closed in September 2014 following the filing of a joint notice of stipulation of dismissal without prejudice.

Although there can be no assurance that an unfavorable outcome would not have a material adverse effect on our operating results, liquidity or financial position, we believe the claims made in the foregoing legal proceedings are without merit and intend to defend ourselves and our products vigorously in all cases.

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We are engaged in certain other claims, legal actions and arbitration matters, all in the ordinary course of business, and believe that the ultimate outcome of these claims, legal actions and arbitration matters will not have a material adverse effect on our operating results, liquidity or financial position.

RISKS AND UNCERTAINTIES

Our business is subject to significant risks and uncertainties and past performance is no guarantee of future performance. The risks and uncertainties described below are those which we currently believe to be material, and do not represent all of the risks that we face.  Additional risks and uncertainties, not presently known to us, may become material in the future or those risks that we currently believe to be immaterial may become material in the future.  If any of the following risks actually occur, alone or in combination, our business, financial condition and results of operations, as well as the market price of our common shares, could be materially adversely affected.

Competition from new or established IoT, cloud services and wireless services companies or from those with greater resources may prevent us from increasing or maintaining our market share and could result in price reductions and/or loss of business with resulting reduced revenues and gross margins.

The market for IoT products and services is highly competitive and rapidly evolving. We have experienced and expect to continue to experience intense competition. More established and larger companies with strong brands and greater financial, technical and marketing resources or companies with different business models sell products and services that compete with ours and we expect this competition to intensify. Business combinations or strategic alliances by our competitors could weaken our competitive position. We may also introduce new products or services that will put us in direct competition with major new competitors. Existing or future competitors may be able to respond more quickly to technological developments and changes and introduce new products before we do or may independently develop and patent technologies and products that are superior to ours or achieve greater acceptance due to factors such as more favorable pricing, more desired or better quality features or more efficient sales channels. If we are unable to compete effectively with our competitors' pricing strategies, technological advances and other initiatives, we may lose customer orders and market share and we may need to reduce the price of our products, resulting in reduced revenue and reduced gross margins. In addition, new market entrants or alliances between customers and suppliers could emerge to disrupt the markets in which we operate through disintermediation of our modules business or other means. There can be no assurance that we will be able to compete successfully and withstand competitive pressures.

Acquisitions and divestitures of businesses or technologies may result in disruptions to our business or may not achieve the anticipated benefits.

The growth of our Company through the successful acquisition and integration of complementary businesses is an important component of our business strategy. For example, on January 16, 2015 we completed the acquisition of Maingate, on June 18, 2015 we completed the acquisition of substantially all of the assets of Accel and on September 2, 2015 we completed the acquisition of all of the outstanding shares of MobiquiThings. We continue to seek opportunities to acquire or invest in businesses, products and technologies that expand, complement or otherwise relate to our business. Any acquisitions, investments or business combinations by us may be accompanied by risks commonly encountered including, but not limited to, the following:

• exposure to unknown liabilities or risks of acquired companies, including unknown litigation related to acts or omissions of an acquired company and/or its directors and officers prior to the acquisition, deficiencies in disclosure controls and procedures of the acquired company and deficiencies in internal controls over financial reporting of the acquired company;

• higher than anticipated acquisition and integration costs and expenses;

• the difficulty and expense of integrating the operations and personnel of the acquired companies;

• use of cash to support the operations of an acquired business;

• increased foreign exchange translation risk depending on the currency denomination of the revenue and expenses of the acquired business;

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• disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management's time and attention from the ongoing business;

• failure to maximize our financial and strategic position by the successful incorporation of acquired technology;

• the inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting and other procedures and policies in a timely manner;

• the potential loss of key employees and customers;

• decrease in our share price if the market perceives that an acquisition does not fit our strategy, the price paid is excessive in light of other similar transactions or that the terms of the acquisition are not favorable to our earnings growth;

• litigation and settlement costs if shareholders bring lawsuits triggered by acquisition or divestiture activities;

• decrease in our share price, if, as a result of our acquisition strategy or growth, we decide to raise additional capital through an offering of securities; and

• dilution to our shareholders if the purchase price is paid in common shares or securities convertible into common shares.

In addition, geographic distances and cultural differences may make integration of businesses more difficult. We may not be successful in overcoming these risks or any other problems encountered in connection with any acquisitions. If realized, these risks could reduce shareholder value.

As business circumstances dictate,we may also decide to divest assets, technologies or businesses. For example, on April 2, 2013 we completed the sale of our AirCard business to NetGear, Inc. In a divestiture, we may not be successful in identifying or managing the risks commonly encountered, including: higher than anticipated costs; disruption of, and demands on, our ongoing business; diversion of management's time and attention; adverse effects on existing business relationships with suppliers and customers and employee issues. We may not be successful in overcoming these risks or any other problems encountered in connection with a divestiture of assets, technologies or businesses which, if realized, could reduce shareholder value.

In addition, we may be unsuccessful at bringing to conclusion proposed transactions. Negotiations and closing activities of transactions are complex functions subject to numerous unforeseen events that may impede the speed at which a transaction is closed or even prevent a transaction from closing. Failure to conclude transactions in an efficient manner may prevent us from advancing other opportunities or introduce unanticipated transition costs.

The loss of any of our significant customers could adversely affect our revenue and profitability, and therefore shareholder value.

We sell our products to OEM's, enterprises, distributors, resellers and network operators, and we are occasionally party to sales agreements with customers comprising a significant portion of our revenue. Accordingly, our business and future success depends on our ability to maintain and build on existing relationships and develop new relationships with OEMs, enterprises, distributors, resellers and network operators. If certain of our significant customers, for any reason, discontinues their relationship with us or reduces or postpones current or expected purchase orders for products, or suffers from business loss, our revenues and profitability could decline materially.

In addition, our current customers purchase our products under purchase orders. Our customers have no contractual obligation to continue to purchase our products following our fulfillment of current purchase orders and if they do not continue to make purchases, our revenue and our profitability could decline materially.

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Cyber attacks or other breaches of information technology security could have an adverse impact on our business.

We rely on certain internal processes, infrastructure and information technology systems to efficiently operate our business in a secure manner, including infrastructure and systems operated by third parties. The inability to continue to enhance or prevent a failure of these internal processes, infrastructure or information technology systems could negatively impact our ability to operate our business. In particular, our cloud and connectivity services depend on very high levels of network reliability and availability in order to provide our customers with the ability to continuously monitor and receive data from their devices.

Cyber attacks or other breaches of network or IT systems security may cause disruptions to our operations including the ability to provide device management and other cloud-based services to our customers. A major security breach could result in the loss of critical data, theft of intellectual property, disclosure of confidential information, customer claims and litigation, reduced revenues due to business interruption, costs associated with remediation of infrastructure and systems, class action and derivative action lawsuits and damage to our reputation. Furthermore, the prevalence and sophistication of these types of threats are increasing and our security measures may not be sufficient to prevent the damage that such threats can inflict on our assets and information. Our insurance may not be adequate to fully reimburse us for these costs and losses.

We may be found to infringe on the intellectual property rights of others.

The industry has many participants that own, or claim to own, proprietary intellectual property. We license technology, intellectual property and software from third parties for use in our products and may be required to license additional technology, intellectual property and software in the future. In some cases, these licenses provide us with certain pass-through rights for the use of other third party intellectual property. There is no assurance that we will be able to maintain our third party licenses or obtain new licenses when required and this inability could materially adversely affect our business and operating results and the quality and functionality of our products.

In the past we have received, and in the future we are likely to continue to receive, assertions or claims from third parties alleging that our products violate or infringe their intellectual property rights. We may be subject to these claims directly or through indemnities against these claims which we have provided to certain customers and other third parties. Our component suppliers and technology licensors do not typically indemnify us against these claims and therefore we do not have recourse against them in the event a claim is asserted against us or a customer we have indemnified. This potential liability, if realized, could materially adversely affect our operating results and financial condition.

Activity in this area by third parties, particularly those with tenuous claims, is increasing, resulting in us taking a more aggressive defensive approach, which may result in increased litigation. In the last few years, patent claims have been brought against us by third parties whose primary (or sole) business purpose is to acquire patents and other intellectual property rights, and not to manufacture and sell products and services. These entities aggressively pursue patent litigation, resulting in increased litigation costs for us. We expect that this recent development will continue for the foreseeable future. Infringement of intellectual property can be difficult to verify and litigation may be necessary to establish whether or not we have infringed the intellectual property rights of others. In many cases, these third parties are companies with substantially greater resources than us, and they may choose to pursue complex litigation to a greater degree than we could. Regardless of whether these infringement claims have merit or not, we may be subject to the following:

• we may be found to be liable for potentially substantial damages, liabilities and litigation costs, including attorneys' fees;

• we may be prohibited from further use of intellectual property as a result of an injunction and may be required to cease selling our products that are subject to the claim;

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• we may have to license third party intellectual property, incurring royalty fees that may or may not be on commercially reasonable terms; in addition, there is no assurance that we will be able to successfully negotiate and obtain such a license from the third party;

• we may have to develop a non-infringing alternative, which could be costly and delay or result in the loss of sales; in addition, there is no assurance that we will be able to develop such a non-infringing alternative;

• management attention and resources may be diverted;

• our relationships with customers may be adversely affected; and

• we may be required to indemnify our customers for certain costs and damages they incur in such a claim.

In addition to potentially being found to be liable for substantial damages in the event of an unfavorable outcome in such a claim and our inability to either obtain a license from the third party on commercial terms or develop a non-infringing alternative, our business, operating results and financial condition may be materially adversely affected and we may have to cease the sale of certain products and restructure our business.

Misappropriation of our intellectual property could place us at a competitive disadvantage.

Our intellectual property is important to our success. We rely on a combination of patent protection, copyrights, trademarks, trade secrets, licenses, non-disclosure agreements and other contractual agreements to protect our intellectual property. Third parties may attempt to copy aspects of our products and technology or obtain information we regard as proprietary without our authorization. If we are unable to protect our intellectual property against unauthorized use by others it could have an adverse effect on our competitive position. Our strategies to deter misappropriation could be inadequate due to the following risks:

• non-recognition of the proprietary nature or inadequate protection of our methodologies in the United States, Canada, France or other foreign countries;

• undetected misappropriation of our intellectual property;

• the substantial legal and other costs of protecting and enforcing our rights in our intellectual property; and

• development of similar technologies by our competitors.

In addition, we could be required to spend significant funds and management resources could be diverted in order to defend our rights, which could disrupt our operations.

We may be unable to attract or retain key personnel which may harm our ability to compete effectively.

Our success depends in large part on the abilities and experience of our executive officers and other key employees. The loss of key employees or deterioration in overall employee morale and engagement as a result of organizational change could have an adverse impact on our growth, operations and profitability.

Competition for highly skilled management, technical, research and development and other key employees is intense in the wireless communications industry. We may not be able to retain our current executive officers or key employees and may not be able to hire and transition in a timely manner experienced and highly qualified additional executive officers and key employees as needed to achieve our business objectives. We do not have fixed-term employment agreements with our key personnel. The loss of executive officers and key employees could disrupt our operations and our ability to compete effectively could be adversely affected.

We may have difficulty responding to changing technology, industry standards and customer requirements, and therefore be unable to develop new products or services in a timely manner which meet the needs of our customers.

The wireless communications industry is subject to rapid technological change, including evolving industry standards, frequent new product inventions, constant improvements in performance characteristics and short product life cycles. Our business and future success will depend, in part, on our ability to accurately predict and anticipate evolving wireless technology standards and develop products that keep pace with the continuing

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changes in technology, evolving industry standards and changing customer and end-user preferences and requirements. Our products embody complex technology that may not meet those standards, preferences and requirements. Our ability to design, develop and commercially launch new products depends on a number of factors including, but not limited to, the following:

• our ability to design and manufacture products or implement solutions and services at an acceptable cost and quality;

• our ability to attract and retain skilled technical employees;

• the availability of critical components from third parties;

• our ability to successfully complete the development of products in a timely manner; and

• the ability of third parties to complete and deliver on outsourced product development engagements.

A failure by us, or our suppliers, in any of these areas or a failure of new products or services to obtain commercial acceptance, could mean we receive less revenue than we anticipate and we may be unable to recover our research and development expenses.

We develop products to meet our customers' requirements. OEM customers award design wins for the integration of wide area embedded wireless modules on a platform by platform basis. Current design wins do not guarantee future design wins. If we are unable or choose not to meet our customers' needs, we may not win their future business and our revenue and profitability may decrease.

In addition, wireless communications service providers require that wireless data systems deployed on their networks comply with their own standards, which may differ from the standards of other providers. We may be unable to successfully address these developments on a timely basis or at all. Our failure to respond quickly and cost-effectively to new developments through the development of new products or enhancements to existing products could cause us to be unable to recover significant research and development expenses and reduce our revenues.

Our financial results are subject to fluctuations that could have a material adverse effect on our business and that could affect the market price of our common shares.

Our revenue, gross margin, operating earnings and net earnings may vary from quarter-to-quarter and could be significantly impacted by a number of factors, including but not limited to the following:

• price and product competition which may result in lower selling prices for some of our products or lost market share;

• price and demand pressure on our products from our customers as they experience pressure in their businesses;

• demand fluctuation based on the success of our customers in selling their products and solutions which incorporate our wireless products and software;

• development and timing of the introduction of our new products including the timing of sales orders, OEM and distributor customer sell through and design win cycles in our embedded wireless module business;

• transition periods associated with the migration to new technologies;

• potential commoditization and saturation in certain markets;

• our ability to accurately forecast demand in order to properly align the purchase of components and the appropriate level of manufacturing capability;

• product mix of our sales (our products have different gross margins — for example the embedded wireless module product line has lower gross margins than the higher margin rugged mobile product line);

• possible delays or shortages in component supplies;

• possible delays in the manufacture or shipment of current or new products;

• possible product quality or factory yield issues that may increase our cost of goods sold;

• concentration in our customer base;

• seasonality in demand;

45

• amount of inventory held by our channel partners;

• possible fluctuations in certain foreign currencies relative to the U.S. dollar that may affect foreign denominated revenue, cost of goods sold and operating expenses;

• impairment of our goodwill or intangible assets which may result in a significant charge to earnings in the period in which an impairment is determined;

• achievement of milestones related to our professional services contracts;  and

• operating expenses that are generally fixed in the short-term and therefore difficult to rapidly adjust to different levels of business.

Any of the factors listed above could cause significant variations in our revenues, gross margin and earnings in any given quarter.  Therefore, our quarterly results are not necessarily indicative of our overall business, results of operations, and financial condition.

Quarterly variations in operating results or any of the other factors listed above, changes in financial estimates by securities analysts, or other events or factors may result in wide fluctuations in the market price of our common shares. Broad market fluctuations or any failure of our operating results in a particular quarter to meet market expectations may adversely affect the market price of our common shares.

Continued difficult or uncertain global economic conditions could adversely affect our operating results and financial condition.

A significant portion of our business is in the United States, Europe and the Asia-Pacific region and we are particularly exposed to the downturns and current uncertainties that impact the wireless communications industry in those economies. Economic uncertainty may cause an increased level of commercial and consumer delinquencies, lack of consumer confidence resulting in delayed purchases or reduced volumes by our customers, credit tightening by lenders, increased market volatility and widespread reduction of business activity generally. To the extent that we experience further economic uncertainty, or deterioration in one of our large markets in the United States, Europe or the Asia-Pacific region, the resulting economic pressure on our customers may cause them to end their relationship with us, reduce or postpone current or expected orders for our products or services, or suffer from business failure, resulting in a material adverse impact to our revenues, profitability, cash flow and bad debt expense.

It is difficult to estimate or project the level of economic activity, including economic growth, in the markets we serve. As our budgeting and forecasting is based on the demand for our products and services, these economic uncertainties result in it being difficult for us to estimate future revenue and expenses.

We have been subject to certain class action lawsuits, and may in the future be subject to class action or derivative action lawsuits, which if decided against us, could require us to pay substantial judgments, settlements or other penalties.

In addition to being subject to litigation in the ordinary course of business, in the future, we may be subject to class actions, derivative actions and other securities litigation and investigations. We expect that this type of litigation will be time consuming, expensive and will distract us from the conduct of our daily business. It is possible that we will be required to pay substantial judgments, settlements or other penalties and incur expenses that could have a material adverse effect on our operating results, liquidity or financial position. Expenses incurred in connection with these lawsuits, which include substantial fees of lawyers and other professional advisors and our obligations to indemnify officers and directors who may be parties to such actions, could materially adversely affect our reputation, operating results, liquidity or financial position. Furthermore, we do not know with certainty if any of this type of litigation and resulting expenses will be fully or even partially covered by our insurance. In addition, these lawsuits may cause our insurance premiums to increase in future periods.

46

Failures of our products or services due to design flaws and errors, component quality issues, manufacturing defects or other quality issues that may result in product liability claims and product recalls could lead to unanticipated costs or otherwise harm our business.

Our products are comprised of hardware and software that is technologically complex and we are reliant on third parties to provide important components for our products. It is possible that our products may contain undetected errors or defects, especially when introduced or when new versions are released. As a result, our products may be rejected by our customers leading to loss of business, loss of revenue, additional development and customer service costs, unanticipated warranty claims, payment of monetary damages under contractual provisions and damage to our reputation.

We depend on a limited number of third parties to manufacture our products. If they do not manufacture our products properly or cannot meet our needs in a timely manner, we may be unable to fulfill our product delivery obligations and our costs may increase, and our revenue and margins could decrease.

We outsource the manufacturing of our products to several contract manufacturers and depend on these manufacturers to meet our needs in a timely and satisfactory manner at a reasonable cost. Third party manufacturers, or other third parties to which such third party manufacturers in turn outsource our manufacturing requirements, may not be able to satisfy our manufacturing requirements on a timely basis, including by failing to meet scheduled production and delivery deadlines or to meet our product quality requirements or the product quality requirements of our customers. Insufficient supply or an interruption or stoppage of supply from such third party manufacturers or our inability to obtain additional or substitute manufacturers when and if needed, and on a cost-effective basis, could have a material adverse effect on our business, results of operations and financial condition. Our reliance on third party manufacturers subjects us to a number of risks, including but not limited to the following:

• potential business interruption due to unexpected events such as natural disasters, labor unrest or geopolitical events;

• the absence of guaranteed or adequate manufacturing capacity;

• potential violations of laws and regulations by our manufacturers that may subject us to additional costs for duties, monetary penalties, seizure and loss of our products or loss of our import privileges, and damage to our reputation;

• reduced control over delivery schedules, production levels, manufacturing yields, costs and product quality;

• the inability of our contract manufacturers to secure adequate volumes of components in a timely manner at a reasonable cost; and

• unexpected increases in manufacturing costs.

If we are unable to successfully manage any of these risks or to locate alternative or additional manufacturers or suppliers in a timely and cost-effective manner, we may not be able to deliver products in a timely manner. In addition, our results of operations could be harmed by increased costs, reduced revenues and reduced margins.

Under our manufacturing agreements, in many cases we are required to place binding purchase orders with our manufacturers well in advance of our receipt of binding purchase orders from our customers. In this situation, we consider our customers' good faith, non-binding forecasts of demand for our products. As a result, if the number of actual products ordered by our customers is materially different from the number of products we have instructed our manufacturer to build (and to purchase components in respect of), then, if too many components have been purchased by our manufacturer, we may be required to purchase such excess component inventory, or, if an insufficient number of components have been purchased by our manufacturer, we may not be in a position to meet all of our customers' requirements. If we are unable to successfully manage our inventory levels and respond to our customers' purchase orders based on their forecasted quantities, our business, operating results and financial condition could be adversely affected.

47

We depend on single source suppliers for some components used in our products and if these suppliers are unable to meet our demand, the delivery of our products to our customers may be interrupted.

From time to time, certain components used in our products have been, and may continue to be, in short supply. Such shortages in allocation of components may result in a delay in filling orders from our customers, which may adversely affect our business. In addition, our products are comprised of components some of which are procured from single source suppliers, including where we have licensed certain software embedded in a component. Our single source suppliers may experience damage or interruption in their operations due to unforeseen events, become insolvent or bankrupt, or experience claims of infringement, all of which could delay or stop their shipment of components to us, which may adversely affect our business, operating results and financial condition. If there is a shortage of any such components and we cannot obtain an appropriate substitute from an alternate supplier of components, we may not be able to deliver sufficient quantities of our products to our customers. If such shortages occur, we may lose business or customers and our operating results and financial condition may be materially adversely affected.

We depend on wireless network carriers to promote and offer acceptable wireless data services.

Our products and our wireless connectivity services can only be used over wireless data networks operated by third parties. Our business and future growth depends, in part, on the successful deployment by network carriers of next generation wireless data and networks and appropriate pricing of wireless data services. We also depend on successful strategic relationships with our network carrier partners and our operating results and financial condition could be harmed if they increase the price of their services or experience operational issues with their networks.

Contractual disputes could have a material adverse effect on our business.

Our business is exposed to the risk of contractual disputes with counterparties and as a result we may be involved in complaints, claims and litigation. We cannot predict the outcome of any complaint, claim or litigation. If a dispute cannot be resolved favorably, it may delay or interrupt our operations and may have a material adverse effect on our operating results, liquidity or financial position.

Government regulations could result in increased costs and inability to sell our products.

Our products are subject to certain mandatory regulatory approvals in the United States, Canada, the European Union, the Asia-Pacific region and other regions in which we operate. For example, in the United States the Federal Communications Commission regulates many aspects of communications devices. In Canada, similar regulations are administered by the Ministry of Industry, through Industry Canada. European Union directives provide comparable regulatory guidance in Europe. Although we have obtained all the necessary Federal Communications Commission, Industry Canada and other required approvals for the products we currently sell, we may not receive approvals for future products on a timely basis, or at all. In addition, regulatory requirements may change or we may not be able to receive regulatory approvals from countries in which we may desire to sell products in the future. If we fail to comply with the applicable regulatory requirements, we may be subject to regulatory and civil liability, additional costs (including fines), reputational harm, and in severe cases, prevented from selling our products in certain jurisdictions.

We may also incur additional expenses or experience difficulties selling our products associated with complying with the SEC rules and reporting requirements related to conflict minerals. In August 2012, the SEC adopted new disclosure requirements implementing Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 for manufacturers of products containing certain minerals that may originate from the Democratic Republic of Congo and adjoining countries. As a result, since 2013 we have been required to conduct certain country of origin and due diligence procedures in order to meet the SEC reporting requirements. The impact of the regulations may limit the sourcing and availability, or may increase the costs, of some of the metals

48

used in the manufacture of our products. Also, since our supply chain is complex, we may be unable to sufficiently verify the origins for all metals used in our products through our supplier due diligence procedures.

The transmission, use and disclosure of user data and personal information could give rise to liabilities or additional costs as a result of laws, governmental regulations and carrier and other customer requirements or differing views of personal privacy rights.

Our products are used to transmit a large volume of data, including personal information. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world that is intended to protect the privacy and security of personal information as well as the collection, storage, transmission, use and disclosure of such information.

The interpretation of privacy and data protection laws in a number of jurisdictions is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from country to country. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. In addition, because our products are sold and used worldwide, certain foreign jurisdictions may claim that we are required to comply with their laws, even where we have no local entity, employees, or infrastructure.

We could be adversely affected if legislation or regulations are expanded to require changes in our products or business practices, if governmental authorities in the jurisdictions in which we do business interpret or implement their legislation or regulations in ways that negatively affect our business or if end users allege that their personal information was misappropriated as a result of a defect or vulnerability in our products. If we are required to allocate significant resources to modify our products or our existing security procedures for the personal information that our products transmit, our business, results of operations and financial condition may be adversely affected.

We are subject to risks inherent in foreign operations.

Sales outside North America represented approximately 69% of our revenue in 2015 and approximately 73% of our revenue in both fiscal 2014 and 2013. We maintain offices in a number of foreign jurisdictions. We have limited experience conducting business in some of the jurisdictions outside North America and we may not be aware of all the factors that may affect our business in foreign jurisdictions. We are subject to a number of risks associated with our international business operations that may increase liabilities, costs, lengthen sales cycles and require significant management attention. These risks include:

• compliance with the laws of the United States, Canada and other countries that apply to our international operations, including import and export legislation, lawful access and privacy laws;

• compliance with existing and emerging anti-corruption laws, including the Foreign Corrupt Practices Act of the United States, the Corruption of Foreign Public Officials Act of Canada and the UK Bribery Act;

• increased reliance on third parties to establish and maintain foreign operations;

• the complexities and expense of administering a business abroad;

• complications in compliance with, and unexpected changes in, foreign regulatory requirements, including requirements relating to content filtering and requests from law enforcement authorities;

• trading and investment policies;

• consumer protection laws that impose additional obligations on us or restrict our ability to provide limited warranty protection;

• instability in economic or political conditions, including inflation, recession and actual or anticipated military conflicts, social upheaval or political uncertainty;

• foreign currency fluctuations;

• foreign exchange controls and cash repatriation restrictions;

• tariffs and other trade barriers;

• difficulties in collecting accounts receivable;

• potential adverse tax consequences;

49

• uncertainties of laws and enforcement relating to the protection of intellectual property or secured technology;

• litigation in foreign court systems;

• cultural and language differences;

• difficulty in managing a geographically dispersed workforce in compliance with local laws and customs that vary from country to country; and

• other factors, depending upon the country involved.

There can be no assurance the policies and procedures implemented by us to address or mitigate these risks will be successful, that our personnel will comply with them or that we will not experience these factors in the future or that they will not have a material adverse effect on our business, results of operations and financial condition.

50

MANAGEMENT’S STATEMENT OF RESPONSIBILITIES

The accompanying consolidated financial statements have been prepared by management and approved by the Board of Directors of Sierra Wireless, Inc. The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States and, where appropriate, reflect management’s best estimates and judgments. Where alternative accounting methods exist, management has chosen those methods deemed most appropriate in the circumstances. Management is responsible for the accuracy, integrity and objectivity of the consolidated financial statements within reasonable limits of materiality.  Financial information provided elsewhere in the Annual Report is consistent with that in the consolidated financial statements.

To assist management in the discharge of these responsibilities, the Company maintains a system of internal controls over financial reporting as described in Management’s Annual Report on Internal Control Over Financial Reporting on page 38 of Management’s Discussion and Analysis.

The Company’s Audit Committee is appointed by the Board of Directors annually and is comprised exclusively of outside, independent directors. The Audit Committee meets with management as well as with the independent auditors to satisfy itself that management is properly discharging its financial reporting responsibilities and to review the consolidated financial statements and the independent auditors’ report. The Audit Committee reports its findings to the Board of Directors for consideration in approving the consolidated financial statements for presentation to the shareholders. The Audit Committee considers, for review by the Board of Directors and approval by the shareholders, the engagement or reappointment of the independent auditors. KPMG LLP has direct access to the Audit Committee of the Board of Directors.

The consolidated financial statements have been independently audited by KPMG LLP, Chartered Professional Accountants, on behalf of the shareholders, in accordance with the standards of the Public Company Accounting Oversight Board (United States) with respect to the consolidated financial statements for the year ended December 31, 2015. Their report outlines the nature of their audit and expresses their opinion on the consolidated financial statements of the Company.

Jason W. Cohenour	David G. McLennan
President and	Chief Financial Officer
Chief Executive Officer

February 29, 2016

Vancouver, Canada

51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Sierra Wireless, Inc.

We have audited the accompanying consolidated balance sheets of Sierra Wireless, Inc. as of December 31, 2015 and 2014 and the related consolidated statements of operations and comprehensive earnings (loss), equity and cash flows for each of the years in the three-year period ended December 31, 2015. These consolidated financial statements are the responsibility of Sierra Wireless, Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sierra Wireless, Inc. as of December 31, 2015 and 2014 and its consolidated results of operations and its consolidated cash flows for each of the years in the three-year period ended December 31, 2015 in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sierra Wireless, Inc.’s internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 29, 2016 expressed an unqualified opinion on the effectiveness of Sierra Wireless, Inc.’s internal control over financial reporting.

Chartered Professional Accountants

February 29, 2016

Vancouver, Canada

52

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Sierra Wireless, Inc.

We have audited Sierra Wireless, Inc.’s internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Sierra Wireless, Inc.’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. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Sierra Wireless, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sierra Wireless, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive earnings (loss), equity and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated February 29, 2016 expressed an unqualified opinion on those consolidated financial statements.

Chartered Professional Accountants

February 29, 2016

Vancouver, Canada

53

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS (LOSS)

(In thousands of U.S. dollars, except where otherwise stated)

	Years ended December 31,
	2015			2014			2013
Revenue	$	607,798		$	548,523		$	441,860
Cost of goods sold	413,943			369,544			296,219
Gross margin	193,855			178,979			145,641
Expenses
Sales and marketing	54,144			50,476			42,182
Research and development (note 8)	74,020			80,937			73,112
Administration	40,321			37,027			35,164
Acquisition-related costs	1,474			1,588			508
Integration	471			1,082			27
Restructuring (note 9)	951			1,598			171
Impairment (note 17 and note 18)	—			3,756			—
Amortization	12,360			9,109			12,141
	183,741			185,573			163,305
Earnings (loss) from operations	10,114			(6,594		)	(17,664		)
Foreign exchange gain (loss)	(11,843		)	(12,390		)	3,823
Other income (expense) (note 10)	115			854			(98		)
Loss before income taxes	(1,614		)	(18,130		)	(13,939		)
Income tax expense (recovery) (note 11)	1,060			(1,277		)	1,611
Net loss from continuing operations	(2,674		)	(16,853		)	(15,550		)
Net earnings from discontinued operations (note 6)	—			—			70,588
Net earnings (loss)	(2,674		)	(16,853		)	55,038
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments, net of taxes of $nil	(2,013		)	893			604
Total comprehensive earnings (loss)	$	(4,687	)	$	(15,960	)	$	55,642
Basic and diluted net earnings (loss) per share (in dollars) (note 13)
Continuing operations	$	(0.08	)	$	(0.53	)	$	(0.50	)
Discontinued operations	—			—			2.29
	$	(0.08	)	$	(0.53	)	$	1.79
Weighted average number of shares outstanding (in thousands) (note 13)
Basic and diluted	32,166			31,512			30,771

The accompanying notes are an integral part of the consolidated financial statements.

54

SIERRA WIRELESS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

	As at December 31,
	2015			2014
Assets
Current assets
Cash and cash equivalents	$	93,936		$	207,062
Accounts receivable (note 14)	116,246			106,799
Inventories (note 15)	32,829			17,445
Deferred income taxes (note 11)	4,735			4,779
Prepaids and other (note 16)	14,179			7,826
	261,925			343,911
Property and equipment (note 17)	28,947			20,717
Intangible assets (note 18)	84,250			37,893
Goodwill (note 19)	156,488			103,966
Deferred income taxes (note 11)	10,130			3,898
Other assets	4,592			4,979
	$	546,332		$	515,364
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 20)	$	128,537		$	128,196
Deferred revenue and credits	3,479			3,245
	132,016			131,441
Long-term obligations (note 21)	44,353			26,608
Deferred income taxes (note 11)	11,667			453
	188,036			158,502
Equity
Shareholders’ equity
Common stock: no par value; unlimited shares authorized; issued and outstanding:
32,337,201 shares (December 31, 2014 — 31,868,541 shares)	346,453			339,640
Preferred stock: no par value; unlimited shares authorized; issued and outstanding: nil shares	—			—
Treasury stock: at cost; 240,613 shares (December 31, 2014 — 342,645 shares)	(4,017		)	(6,236		)
Additional paid-in capital	23,998			26,909
Retained earnings (deficit)	(160		)	2,514
Accumulated other comprehensive loss (note 22)	(7,978		)	(5,965		)
	358,296			356,862
	$	546,332		$	515,364
Commitments and contingencies (note 26)
Subsequent events (note 23)

The accompanying notes are an integral part of the consolidated financial statements.

On behalf of the Board:
Jason W. Cohenour	Robin A. Abrams
Director	Director

55

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands of U.S. dollars)

	Common Stock					Treasury Shares
	# of shares		$			# of shares		$			Additional paid-in capital			Retained earnings (deficit)			Accumulated other comprehensive income (loss)			Total
Balance as at December 31, 2012	30,592,423		$	322,770		716,313		$	(5,172	)	$	23,203		$	(35,283	)	$	(7,462	)	$	298,056
Common share cancellation (note 23)	(510,439	)	(5,384		)	—		—			—			(388		)	—			(5,772		)
Stock option exercises (note 12)	965,228		11,853			—		—			(3,747		)	—			—			8,106
Stock-based compensation (note 12)	—		—			—		—			9,347			—			—			9,347
Purchase of treasury shares for RSU distribution	—		—			270,265		(3,433		)	—			—			—			(3,433		)
Distribution of vested RSUs	50,632		389			(479,431	)	3,468			(4,265		)	—			—			(408		)
Excess tax benefits from equity awards	—		—			—		—			1,458			—			—			1,458
Net earnings	—		—			—		—			—			55,038			—			55,038
Foreign currency translation adjustments, net of tax	—		—			—		—			—			—			604			604
Balance as at December 31, 2013	31,097,844		$	329,628		507,147		$	(5,137	)	$	25,996		$	19,367		$	(6,858	)	$	362,996
Stock option exercises (note 12)	686,384		9,236			—		—			(2,832		)	—			—			6,404
Stock-based compensation (note 12)	—		—			—		—			9,404			—			—			9,404
Purchase of treasury shares for RSU distribution	—		—			311,333		(5,955		)	—			—			—			(5,955		)
Distribution of vested RSUs	84,313		776			(475,835	)	4,856			(7,035		)	—			—			(1,403		)
Excess tax benefits from equity awards	—		—			—		—			1,376			—			—			1,376
Net loss	—		—			—		—			—			(16,853		)	—			(16,853		)
Foreign currency translation adjustments, net of tax	—		—			—		—			—			—			893			893
Balance as at December 31, 2014	31,868,541		$	339,640		342,645		$	(6,236	)	$	26,909		$	2,514		$	(5,965	)	$	356,862
Stock option exercises (note 12)	357,136		5,434			—		—			(1,597		)	—			—			3,837
Stock-based compensation (note 12)	—		—			—		—			8,942			—			—			8,942
Purchase of treasury shares for RSU distribution	—		—			306,476		(6,584		)	—			—			—			(6,584		)
Distribution of vested RSUs	111,524		1,379			(408,508	)	8,803			(12,526		)	—			—			(2,344		)
Excess tax benefits from equity awards	—		—			—		—			2,270			—			—			2,270
Net loss	—		—			—		—			—			(2,674		)	—			(2,674		)
Foreign currency translation adjustments, net of tax	—		—			—		—			—			—			(2,013		)	(2,013		)
Balance as at December 31, 2015	32,337,201		$	346,453		240,613		$	(4,017	)	$	23,998		$	(160	)	$	(7,978	)	$	358,296

 The accompanying notes are an integral part of the consolidated financial statements.

56

SIERRA WIRELESS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

	Years ended December 31,
	2015			2014			2013
Cash flows provided by (used in):
Operating activities
Net earnings (loss)	$	(2,674	)	$	(16,853	)	$	55,038
Items not requiring (providing) cash
Amortization	20,216			23,517			28,296
Stock-based compensation (note 12(a))	8,942			9,404			9,347
Gain on sale of AirCard business (note 6)	—			—			(94,078		)
Deferred income taxes	(2,841		)	771			16,339
Loss (gain) on disposal of property and equipment	92			21			(10		)
Fair value adjustment of contingent consideration	(761		)	—			—
Impairment	—			3,756			—
Impairment of assets related to discontinued operations	—			—			1,012
Other	6,115			6,764			(2,687		)
Changes in non-cash working capital
Accounts receivable	(8,437		)	(5,180		)	10,897
Inventories	(16,262		)	(8,949		)	11,908
Prepaid expenses and other	(5,748		)	25,421			(7,254		)
Accounts payable and accrued liabilities	16,342			10,538			(13,139		)
Deferred revenue and credits	(451		)	(510		)	1,147
Cash flows provided by operating activities	14,533			48,700			16,816
Investing activities
Acquisition of M2M business of AnyDATA (note 5(a))	—			—			(5,196		)
Acquisition of In Motion Technology, net of cash acquired (note 5(b))	—			(23,853		)	—
Acquisition of Wireless Maingate AB, net of cash acquired (note 5(c))	(88,449		)	—			—
Acquisition of Accel Networks LLC (note 5(d))	(9,471		)	—			—
Acquisition of MobiquiThings SAS, net of cash acquired (note 5(e))	(14,975		)	—			—
Additions to property and equipment	(14,003		)	(9,078		)	(11,359		)
Proceeds from sale of property & equipment	5			130			32
Increase in intangible assets	(1,076		)	(1,751		)	(2,211		)
Proceeds from sale of AirCard Business (note 6)	—			13,800			119,958
Net change in short-term investments	—			2,470			(2,470		)
Increase in other assets	—			(4,054		)	—
Cash flows provided by (used in) investing activities	(127,969		)	(22,336		)	98,754
Financing activities
Issuance of common shares, net of share issue costs	3,837			6,404			8,106
Repurchase of common shares for cancellation (note 23)	—			—			(5,772		)
Purchase of treasury shares for RSU distribution	(6,584		)	(5,955		)	(3,433		)
Taxes paid related to net settlement of equity awards	(2,344		)	(1,403		)	(408		)
Excess tax benefits from equity awards	2,270			1,376			1,458
Decrease in other long-term obligations	(226		)	(400		)	(876		)
Cash flows provided by (used in) financing activities	(3,047		)	22			(925		)
Effect of foreign exchange rate changes on cash and cash equivalents	3,357			3,260			(875		)
Cash and cash equivalents, increase (decrease) in the year	(113,126		)	29,646			113,770
Cash and cash equivalents, beginning of year	207,062			177,416			63,646
Cash and cash equivalents, end of year	$	93,936		$	207,062		$	177,416
Supplemental disclosures:
Net income taxes paid	$	3,093		$	3,763		$	5,746
Interest paid	137			63			130
Non-cash purchase of property and equipment (funded by obligation under capital lease)	237			296			243

 The accompanying notes are an integral part of the consolidated financial statements.

57

SIERRA WIRELESS, INC.

TABLE OF CONTENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

		Page
Note 1	Nature of Operations	59
Note 2	Summary of Significant Accounting Policies	59
Note 3	Recently Implemented Accounting Standards	65
Note 4	Changes in Future Accounting Standards	65
Note 5	Acquisitions	66
Note 6	Disposition of AirCard Business	73
Note 7	Segmented Information	74
Note 8	Research and Development	75
Note 9	Restructuring	76
Note 10	Other Income (Expense)	76
Note 11	Income Taxes	77
Note 12	Stock-based Compensation Plans	80
Note 13	Earnings (Loss) Per Share	83
Note 14	Accounts Receivable	84
Note 15	Inventories	84
Note 16	Prepaids and Other	84
Note 17	Property and Equipment	85
Note 18	Intangible Assets	86
Note 19	Goodwill	87
Note 20	Accounts Payable and Accrued Liabilities	87
Note 21	Long-term Obligations	88
Note 22	Accumulated Other Comprehensive Loss	88
Note 23	Share Capital	88
Note 24	Fair Value Measurement	89
Note 25	Financial Instruments	90
Note 26	Commitments and Contingencies	91

58

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

1.    NATURE OF OPERATIONS

Sierra Wireless, Inc., together with its subsidiaries (collectively, "the company, we, our”) was incorporated under the Canada Business Corporations Act on May 31, 1993. Sierra Wireless is building the Internet of Things ("IoT") with intelligent wireless solutions that empower organizations to innovate in the connected world. We offer the industry's most comprehensive portfolio of second generation ("2G"), third generation ("3G") and fourth generation ("4G") cellular embedded wireless modules and gateways, seamlessly integrated with our secure cloud and connectivity services. Original Equipment Manufacturers ("OEMs") and enterprises worldwide trust our innovative cellular solutions to get their connected products and services to market faster. Our products, services and solutions connect people, their mobile computers and machines to wireless voice and data networks around the world. We have sales, engineering, and research and development teams located in offices around the world.

We have three reportable segments effective October 1, 2015 reflecting our current organization subsequent to the acquisitions of Wireless Maingate AB ("Maingate"), Accel Networks LLC ("Accel"), and MobiquiThings SAS ("MobiquiThings") (note 5), combined with a reorganization of our Enterprise Solutions business segment to provide dedicated focus on our gateways business. Prior to October 1, 2015, we had two reportable segments, OEM Solutions and Enterprise Solutions, and the operations of the three acquisitions during the year were included in the Enterprise Solutions segment.

We have the following three segments:

OEM Solutions	- AirPrime embedded wireless modules for IoT connectivity, including an embedded application framework to support customer applications
Enterprise Solutions	- Airlink intelligent gateways, including systems and services for secure gateway management
Cloud and Connectivity Services	- Cloud and Connectivity services, including managed cellular connectivity for the IoT and cloud based services for operations management and application enablement (reflects our AirVantage cloud plus the acquisitions of Maingate, Accel, MobiquiThings)

The primary markets for our products are North America, Europe and Asia Pacific.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with U.S. GAAP.

(a)    Basis of consolidation

Our consolidated financial statements include the accounts of the company and its subsidiaries, all of which are wholly-owned, from their respective dates of acquisition of control.  All inter-company transactions and balances have been eliminated on consolidation.

(b)    Use of estimates

The consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the year.  On an ongoing basis, management reviews its estimates, including those related to inventory obsolescence, estimated useful lives of long-lived assets, valuation of intangible assets, goodwill, royalty and

59

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

warranty accruals, other liabilities, stock-based compensation, allowance for doubtful accounts receivable, income taxes, restructuring costs, contingent consideration and commitments and contingencies, based on currently available information.  Actual amounts could differ from estimates.

(c)    Revenue recognition

Revenue from sales of products and services is recognized upon the later of transfer of title or upon shipment of the product to the customer or rendering of the service, so long as persuasive evidence of an arrangement exists, delivery has occurred, price is fixed or determinable, and collection is reasonably assured.

Cash received in advance of the revenue recognition criteria being met is recorded as deferred revenue.

Revenues from contracts with multiple-element arrangements are recognized as each element is earned based on the relative fair value of each element and only when there are no undelivered elements that are essential to the functionality of the delivered elements.

Revenue from activation or set up fees charged in advance of contracted monthly recurring revenue is deferred and recognized over the estimated customer life on a straight line basis.

Revenue from licensed software is recognized at the inception of the license term.  Revenue from software maintenance, unspecified upgrades and technical support contracts is recognized over the period such items are delivered or services are provided. Technical support contracts extending beyond the current period are recorded as deferred revenue and amortized into income over the applicable earning period.

Funding from certain research and development agreements is recognized as revenue when certain criteria stipulated under the terms of those funding agreements have been met, and when there is reasonable assurance the funding will be received. Certain research and development funding may be repayable on the occurrence of specified future events. We recognize the liability to repay research and development funding in the period in which conditions arise that would cause research and development funding to be repayable.

(d)    Research and development costs

Research and development costs are expensed as they are incurred.  Certain software development costs associated with the development of our cloud platform to be sold, leased or marketed are capitalized once technological feasibility is reached.

We follow the cost reduction method of accounting for certain agreements, including government research and development funding, whereby the benefit of the funding is recognized as a reduction in the cost of the related expenditure when certain criteria stipulated under the terms of those funding agreements have been met, and there is reasonable assurance the research and development funding will be received. Certain research and development funding is repayable on the occurrence of specified future events. We recognize the liability to repay research and development funding in the period in which conditions arise that will cause research and development funding to be repayable.

60

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

(e)    Warranty costs

Warranty costs are accrued upon the recognition of related revenue, based on our best estimates, with reference to past and expected future experience.  Warranty obligations are included in accounts payable and accrued liabilities in our consolidated balance sheet.

(f)    Royalty costs

We have intellectual property license agreements which generally require us to make royalty payments based on a combination of fixed fees and percentage of the revenue generated by sales of products incorporating the licensed technology.  We recognize royalty obligations in accordance with the terms of the respective royalty agreements.  Royalty costs are recorded as a component of cost of goods sold in the period when incurred. We also accrue royalty potential obligations based on current best estimates where agreements have not been finalized.

(g)    Market development costs

Market development costs are charged to sales and marketing expense to the extent that the benefit is separable from the revenue transaction and the fair value of that benefit is determinable.  To the extent that such costs either do not provide a separable benefit, or the fair value of the benefit cannot be reliably estimated, such amounts are recorded as a reduction of revenue.

(h)    Income taxes

Income taxes are accounted for using the asset and liability method.  Deferred income tax assets and liabilities are based on temporary differences (differences between the accounting basis and the tax basis of the assets and liabilities) and non-capital loss, capital loss, and tax credits carry-forwards are measured using the enacted tax rates and laws expected to apply when these differences reverse.  Deferred tax benefits, including non-capital loss, capital loss, and tax credits carry-forwards, are recognized to the extent that realization of such benefits is considered more likely than not.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that enactment occurs.

We include interest and penalties related to income taxes, including unrecognized tax benefits, in income tax expense (recovery).

Liabilities for uncertain tax positions are recorded based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.

We recognize the windfall tax benefits associated with the exercise of stock options and release of restricted share units to additional paid-in capital (“APIC”) when realized. This tax benefit is not recognized until the deduction reduces taxes payable and all other available loss carry-forwards and tax credits have been utilized.

61

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

(i)    Stock-based compensation and other stock-based payments

Stock options and restricted share units granted to the company’s key officers, directors and employees are accounted for using the fair value-based method.  Under this method, compensation cost for stock options is measured at fair value at the date of grant using the Black-Scholes valuation model, and is expensed over the award’s vesting period using the straight-line method.  Any consideration paid by plan participants on the exercise of stock options or the purchase of shares is credited to common stock together with any related stock-based compensation expense.  Compensation cost for restricted share units is measured at fair value at the date of grant which is the market price of the underlying security, and is expensed over the award’s vesting period using the straight-line method.

(j)    Earnings (loss) per common share

Basic earnings (loss) per share is computed by dividing net earnings (loss) for the period by the weighted average number of company common shares outstanding during the reporting period.  Diluted earnings (loss) per share is computed using the treasury stock method.  When the effect of options and other securities convertible into common shares is anti-dilutive, including when the company has incurred a loss for the period, basic and diluted earnings (loss) per share are the same.

Under the treasury stock method, the number of dilutive shares, if any, is determined by dividing the average market price of shares for the period into the net proceeds of in-the-money options.

(k)    Translation of foreign currencies

Our functional or primary operating currency is the U.S. dollar.

Revenue and expense items denominated in foreign currencies are translated at exchange rates prevailing during the period.  Monetary assets and liabilities denominated in foreign currencies are translated at the period-end exchange rates.  Non-monetary assets and liabilities are translated at exchange rates in effect when the assets are acquired or the obligations are incurred.  Foreign exchange gains and losses are reflected in net earnings (loss) for the period.

We have foreign subsidiaries that are considered to be self-contained and integrated within their foreign jurisdiction, and accordingly, use the respective local currency as their functional currency.  The assets and liabilities of the foreign subsidiaries, including goodwill and fair value adjustments arising on acquisition, are translated at exchange rates at the balance sheet dates, equity is translated at historical rates, and revenue and expenses are translated at exchange rates prevailing during the period.  The foreign exchange gains and losses arising from the translation are reported as a component of other comprehensive income (loss), as presented in note 22, Accumulated Other Comprehensive Loss.

(l)    Cash and cash equivalents

Cash and cash equivalents include cash and short-term deposits with original maturities of three months or less.  Short-term deposits are valued at amortized cost.  The carrying amounts approximate fair value due to the short-term maturities of these instruments.

62

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

(m)    Allowance for doubtful accounts receivable

We maintain an allowance for our accounts receivable for estimated losses that may result from our customers’ inability to pay.  We determine the amount of the allowance by analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses, insured amounts, if any, and changes in customer payment cycles and credit-worthiness.  Amounts later determined and specifically identified to be uncollectible are charged against this allowance.

If the financial condition of any of our customers deteriorates resulting in an impairment of their ability to make payments, we may increase our allowance.

(n)    Inventories

Inventories consist of electronic components and finished goods and are valued at the lower of cost or estimable realizable value, determined on a first-in-first-out basis.  Cost is defined as all costs that relate to bringing the inventory to its present condition and location under normal operating conditions.

We review the components of our inventory and our inventory purchase commitments on a regular basis for excess and obsolete inventory based on estimated future usage and sales.  Write-downs in inventory value or losses on inventory purchase commitments depend on various items, including factors related to customer demand, economic and competitive conditions, technological advances and new product introductions that vary from current expectations.  We believe that the estimates used in calculating the inventory provision are reasonable and properly reflect the risk of excess and obsolete inventory.  If customer demands for our inventory are substantially less than our estimates, additional inventory write-downs may be required.

(o)    Property and equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. We amortize our property and equipment on a straight-line basis over the following estimated economic lives:

Furniture and fixtures	3-5 years
Research and development equipment	3-10 years
Production equipment	2-7 years
Tooling	1.5-3 years
Computer equipment	1-5 years
Software	1-5 years
Office equipment	3-5 years
Network equipment	3-7 years

Research and development equipment related amortization is included in research and development expense.  Tooling, production and certain network equipment related amortization is included in cost of goods sold.  All other amortization is included in amortization expense.

Leasehold improvements and leased vehicles are amortized on a straight-line basis over the lesser of their expected average service life or term of the initial lease.

63

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

When we sell property and equipment, we net the historical cost less accumulated depreciation and amortization against the sale proceeds and include the difference in Other income (expense). 

(p)    Intangible assets

The estimated useful life of intangible assets with definite lives is the period over which the assets are expected to contribute to our future cash flows.  When determining the useful life, we consider the expected use of the asset, useful life of any related intangible asset, any legal, regulatory or contractual provisions that limit the useful life, any legal, regulatory, or contractual renewal or extension provisions without substantial costs or modifications to the existing terms and conditions, the effects of obsolescence, demand, competition and other economic factors,  and the expected level of maintenance expenditures relative to the cost of the asset required to obtain future cash flows from the asset.

We amortize our intangible assets on a straight-line basis over the following specific periods:

Patents and trademarks	—	3-5 years
Licenses	—	over the shorter of the term of the license or an estimate of their useful life, ranging from three to ten years
Intellectual property and customer relationships	—	3-13 years
Brand	—	over the estimated life
In-process research and development	—	over the estimated life

In-process research and development (“IPRD”) are intangible assets acquired as part of business combinations.  Prior to their completion, IPRD are intangible assets with indefinite life and they are not amortized but subject to impairment test on an annual basis.

Research and development related amortization is included in research and development expense. All other amortization is included in amortization expense.

(q)    Goodwill

Goodwill represents the excess of the purchase price of an acquired business over the fair value assigned to assets acquired and liabilities assumed in a business combination.

Goodwill has an indefinite life, is not amortized, and is subject to a two-step impairment test on an annual basis. The first step compares the fair value of the reporting unit to its carrying amount, which includes the goodwill. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired and the second step of the impairment test is unnecessary. If the carrying amount exceeds the implied fair value of the goodwill, the second step measures the amount of the impairment loss.  If the carrying amount exceeds the fair value of the goodwill, an impairment loss is recognized equal to that excess.

(r)    Impairment of long-lived assets

Long-lived assets, including property and equipment, and intangible assets other than goodwill, are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds

64

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. Intangible assets with indefinite lives are tested annually for impairment and in interim periods if certain events occur indicating that the carrying value of the intangible assets may be impaired.

(s)    Comprehensive income (loss)

Comprehensive income (loss) includes net earnings (loss) as well as changes in equity from other non-owner sources. The other changes in equity included in comprehensive income (loss) are comprised of foreign currency cumulative translation adjustments and unrealized gains or losses on available-for-sale investments.

(t)    Investment tax credits

Investment tax credits are accounted for using the flow-through method whereby such credits are accounted for as a reduction of income tax expense in the period in which the credit arises.

(u)    Comparative figures

Certain figures presented in the consolidated financial statements have been reclassified to conform to the presentation adopted for the current year.

3.    RECENTLY IMPLEMENTED ACCOUNTING STANDARDS

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The standard is effective for fiscal years beginning after December 15, 2015. Early application is permitted. We elected to early adopt this standard in the fourth quarter of 2015. During the fourth quarter of 2015, we made adjustments to the amounts previously recorded on the 2015 acquisitions of Wireless Maingate AB, Accel Networks LLC, and MobiquiThings SAS.

4.    CHANGES IN FUTURE ACCOUNTING STANDARDS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The update is intended to clarify the principles of recognizing revenue, and to develop a common revenue standard for U.S. GAAP and IFRS that would remove inconsistencies in revenue requirements, leading to improved comparability of revenue recognition practices across entities and industries. ASC 606 contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much, and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard is effective for annual and interim financial statements for fiscal years beginning after December 15, 2017. Early application is permitted in fiscal years beginning after December 15, 2016. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

65

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The update provides guidance about management's responsibility in evaluating whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Given our financial condition, we do not expect the update to have a significant impact on our disclosures.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The update provides accounting guidance for customers with cloud computing arrangements. The standard is effective for interim and annual periods ending after December 15, 2015. Early application is permitted. We do not expect this update to have a material impact on our financial statements and business.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The update provides that an entity should measure inventory within the scope of the standard at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard is effective for interim and annual periods ending after December 15, 2016 and applied prospectively. Early application is permitted. We do not expect this update to have a material impact on our financial statements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The standard is effective for interim and annual periods ending after December 15, 2016. Early application is permitted. Other than the revised presentation of deferred tax liabilities and assets from current to noncurrent, we do not expect this update to have an impact on our financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update is to improve transparency and comparability among organizations by requiring lessees to recognize right-of-use assets and lease liabilities on the balance sheet and requiring additional disclosure about leasing arrangements. The standard is effective for fiscal years beginning after December 15, 2018. Early application is permitted. We are in the process of evaluating the impact of this update and cannot reasonably estimate the effect on our financial statements and business at this time.

. 5.    ACQUISITIONS

(a)     M2M business of AnyDATA

On October 16, 2013, we completed the acquisition of substantially all of the M2M embedded module and modem related assets of AnyDATA Corporation ("AnyDATA") for cash consideration of $5.2 million.  The acquisition extended our global leadership position in the growing M2M market and offered a significantly enhanced market position for us in key segments, as well as new geographical expansion into Korea. AnyDATA’s results of operations and fair value of assets acquired and liabilities assumed are included in our consolidated financial statements from the date of acquisition.

We 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 fair values, as at October 16, 2013.  The excess of the purchase price over the final value assigned to the net assets acquired was recorded as goodwill.

66

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The following table summarizes the final amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

	$
Assets acquired
Inventory	1,296
Machinery and equipment	68
Identifiable intangible assets	1,793
Goodwill	2,061
	5,218
Liabilities assumed
Accrued liabilities	22
Fair value of net assets acquired	5,196

The goodwill of $2.1 million resulting from the acquisition offers us a significantly enhanced market position.  Goodwill was assigned to the OEM Solutions segment and is not deductible for tax purposes.

The following table provides the components of the identifiable intangible assets acquired that are subject to amortization:

	Estimated useful life (in years)	$
Customer relationships	5	1,284
Existing technology	3	385
In-process research and development	2	124
		1,793

(b)     In Motion Technology

On March 3, 2014, we completed the acquisition of all the shares of In Motion Technology Inc. ("In Motion") for total cash consideration of $26.1 million. In Motion is a leader in mobile enterprise networks that provides customers with fleets in mission critical environments with a secure, managed end-to-end communications system. In Motion's solutions are used by public safety, transit and utility fleets across the US and Canada.

In Motion's results of operations and fair value of assets acquired and liabilities assumed are included in our consolidated financial statements from the date of acquisition.

We 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 fair values as at March 3, 2014.  The excess of the purchase price over the final value assigned to the net assets acquired was recorded as goodwill.

67

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The following table summarizes the final amounts of the assets acquired and liabilities assumed at the acquisition date:

	$
Assets acquired
Cash	2,255
Accounts receivable	5,189
Prepaid and other assets	329
Inventory	1,059
Property and equipment	84
Identifiable intangible assets	13,529
Goodwill	8,697
	31,142
Liabilities assumed
Accounts payable and accrued liabilities	2,817
Deferred revenue	1,772
Deferred income tax	445
Fair value of net assets acquired	26,108

Goodwill of $8.7 million resulting from the acquisition consists largely of the expectation that the acquisition will extend our leadership position in the M2M market and offer us a significantly enhanced market position.  Goodwill was assigned to the Enterprise Solutions segment and is not deductible for tax purposes.

The following table provides the components of the identifiable intangible assets acquired that are subject to amortization:

	Estimated useful life	$
Backlog	7 months	358
Customer relationships	13 years	8,739
Existing technology	7 years	3,144
In-process research and development	5 years	1,288
		13,529

The following table presents the unaudited pro forma results for the year ended December 31, 2014 and 2013. The pro forma financial information combines the results of operations of Sierra Wireless, Inc. and In Motion as though the businesses had been combined as of the beginning of fiscal 2013. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2013. The pro forma financial information presented includes amortization charges for acquired tangible and intangible assets, and related tax effects.

	2014			2013
Pro forma information
Revenue	$	550,279		$	457,152
Loss from operations	(7,507		)	(18,233		)
Net earnings (loss)	(17,559		)	54,875
Basic and diluted earnings (loss) per share (in dollars)	$	(0.56	)	$	1.78

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SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

(c)     Wireless Maingate AB

On January 16, 2015, we acquired all of the shares of Wireless Maingate AB ("Maingate") for cash consideration of $91.6 million ($88.4 million, net of cash acquired). Maingate is a Sweden-based provider of M2M connectivity and data management services.

We accounted for the transaction using the acquisition method and accordingly, recorded the tangible and intangible assets acquired and liabilities assumed on the basis of our estimates of their respective fair values as at January 16, 2015. The excess of the purchase price over the final value assigned to the net assets acquired is recorded as goodwill.

The following table summarizes the final values assigned to the assets acquired and liabilities assumed at the acquisition date:

	$
Assets acquired
Cash	3,139
Accounts receivable	2,795
Prepaid and other assets	270
Inventory	75
Property and equipment	275
Identifiable intangible assets	50,231
Goodwill	45,593
	102,378
Liabilities assumed
Accounts payable and accrued liabilities	4,437
Deferred revenue	172
Deferred income tax	6,181
Fair value of net assets acquired	91,588

The goodwill of $45.6 million resulting from the acquisition consists largely of the expectation that the acquisition will strengthen our business and offer us significantly enhanced market position in Europe.  Goodwill has been assigned to the Cloud and Connectivity Services segment and is not deductible for tax purposes.

The following table provides the components of the identifiable intangible assets acquired that are subject to amortization:

	Estimated useful life	$
Brand	20 years	4,820
Customer relationships	12 years	34,571
Existing technology	4 years	3,411
In-process research and development	8 years	7,429
		50,231

The amount of revenue of Maingate included in our consolidated statements of operations from the acquisition date, through the period ended December 31, 2015, was $15.3 million. The amount of net loss of Maingate included in our consolidated statements of operations for the aforementioned period was $0.3 million.

69

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The following table presents the unaudited pro forma results for the year ended December 31, 2015 and 2014. The pro forma financial information combines the results of operations of Sierra Wireless, Inc. and Maingate as though the businesses had been combined as of the beginning of fiscal 2014. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2014. The unaudited pro forma financial information presented includes amortization charges for acquired tangible and intangible assets, and related tax effects.

	2015			2014
Pro forma information
Revenue	$	608,516		$	569,340
Earnings (loss) from operations	8,861			(4,719		)
Net loss	(3,652		)	(15,339		)
Basic and diluted loss per share (in dollars)	$	(0.11	)	$	(0.49	)

(d)     Accel Networks LLC

On June 18, 2015, we acquired substantially all of the assets of Accel Networks LLC ("Accel") for cash consideration of $9.5 million, plus a maximum contingent consideration of $1.5 million under a performance-based earnout formula. Accel is a leader in managed cellular broadband technology and connectivity services in North America.

At acquisition date, we recognized the fair value of the contingent consideration at $0.8 million based on a weighted probability estimate of achievement of the earnout within the specified 12 month period of the contingent consideration. At December 31, 2015, management determined that the achievement of the earnout will not be attained and recorded the reversal of the fair value of the contingent consideration in acquisition-related costs.

We accounted for the transaction using the acquisition method and accordingly, we have recorded the tangible and intangible assets acquired and liabilities assumed on the basis of their respective fair values as at June 18, 2015. The excess of the purchase price over the final value assigned to the net assets acquired is recorded as goodwill.

Total consideration for the acquisition is as follows:

	$
Cash	9,471
Contingent consideration	753
	10,224

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SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The following table summarizes the final values assigned to the assets acquired and liabilities assumed at the acquisition date:

	$
Assets acquired
Accounts receivable	551
Prepaid and other assets	59
Inventory	133
Property and equipment	1,388
Identifiable intangible assets	5,499
Goodwill	3,706
	11,336
Liabilities assumed
Accounts payable and accrued liabilities	1,034
Deferred revenue	78
Fair value of net assets acquired	10,224

The goodwill of $3.7 million resulting from the acquisition consists largely of the expectation that the acquisition will strengthen our Cloud and Connectivity Services segment.  Goodwill has been assigned to the Cloud and Connectivity Services segment and is deductible for tax purposes.

The following table provides the components of the identifiable intangible assets acquired that are subject to amortization:

	Estimated useful life	$
Brand	20 years	1,169
Customer relationships	10 years	2,352
Existing technology	5 years	1,978
		5,499

The amount of revenue of Accel included in our consolidated statements of operations from the acquisition date, through the period ended December 31, 2015, was $4.0 million. The amount of net loss of Accel included in our consolidated statements of operations for the aforementioned period was $0.3 million.

The acquisition had no significant impact on revenues and net earnings for the year ended December 31, 2015. There was also no significant impact on the Company's revenues and net income on a pro forma basis for all periods presented.

(e)     MobiquiThings SAS

On September 2, 2015, we acquired all of the shares of MobiquiThings SAS ("MobiquiThings") for cash consideration of €13.5 million ($15.2 million), plus a maximum contingent consideration of €12 million under a performance-based earnout formula. MobiquiThings is a France-based mobile virtual network operator dedicated exclusively to the Machine-to-Machine and Telematics marketplace.

At acquisition date, we recognized the contingent consideration at fair value based on a weighted probability estimate of achievement of the earnout within the specified periods of the contingent consideration. In accordance with ASC 805, Business Combinations, $0.5 million was recognized as

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SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

purchase price consideration and the remaining balance will be expensed to acquisition-related costs over the earnout period. The change in fair value at each reporting period will be recognized in earnings.

Total consideration for the acquisition is as follows:

	€	$
Cash	13,506	15,216
Contingent consideration	470	529
	13,976	15,745

We accounted for the transaction using the acquisition method and accordingly, we have recorded the tangible and intangible assets acquired and liabilities assumed on the basis of our estimates of their respective fair values as at September 2, 2015. The excess of the purchase price over the preliminary value assigned to the net assets acquired is recorded as goodwill.

The following table summarizes the preliminary values assigned to the assets acquired and liabilities assumed at the acquisition date:

	€	$
Assets acquired
Cash	214	241
Accounts receivable	1,026	1,156
Prepaids and other assets	107	120
Property and equipment	1,041	1,173
Identifiable intangible assets	5,071	5,713
Goodwill	9,922	11,179
	17,381	19,582
Liabilities assumed
Accounts payable and accrued liabilities	1,715	1,932
Deferred income tax	1,690	1,905
Fair value of net assets acquired	13,976	15,745

The goodwill of $11.2 million resulting from the acquisition consists largely of the expectation that the acquisition will further solidify our device-to-cloud strategy. Goodwill will be assigned to the Cloud and Connectivity Services segment and is not deductible for tax purposes.

The following table provides the preliminary components of the identifiable intangible assets acquired that are subject to amortization:

	Estimated useful life	€	$
Customer relationships	11 years	3,379	3,807
Existing technology	4.5 years	1,692	1,906
		5,071	5,713

The amount of revenue of MobiquiThings included in our consolidated statements of operations from the acquisition date, through the period ended December 31, 2015, was $0.8 million. The amount of net loss of MobiquiThings included in our consolidated statements of operations for the aforementioned period was $0.2 million.

72

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The acquisition had no significant impact on revenues and net earnings for the year ended December 31, 2015. There was also no significant impact on the Company's revenues and net income on a pro forma basis for all periods presented.

6.    DISPOSITION OF AIRCARD BUSINESS

On April 2, 2013, we completed the sale of substantially all of the assets and operations related to our AirCard business to Netgear, Inc. ("Netgear") for total proceeds of $136.6 million after final inventory adjustments plus assumed liabilities.  After transaction costs of $2.8 million, we recorded an after tax gain on disposal of $70.2 million. On April 3, 2014, we received the full $13.8 million cash proceeds previously held in escrow for realized net cash proceeds of $127.8 million from the divestiture after giving consideration to related taxes and transaction costs.

The gain on sale of the AirCard business consisted of:

Cash proceeds received	$	122,807
Proceeds held in escrow	13,800
Total proceeds	$	136,607
Transaction costs	(2,849		)
Net proceeds	$	133,758
Assets and liabilities held for sale	(39,680		)
Gross gain on disposal	$	94,078
Income tax expense	(23,896		)
Gain on disposal, net of taxes	$	70,182

The company utilized $14.4 million of deferred income tax assets against the gain on sale of the AirCard business.

The results related to the AirCard business have been presented as discontinued operations in the statement of earnings for the year ended December 31, 2013 and were as follows:

	2013
Revenue	$	46,701
Cost of goods sold	32,978
Gross margin	$	13,723
Expenses	(12,918		)
Gain on sale of AirCard business	94,078
Earnings before income taxes	$	94,883
Income tax expense	(24,295		)
Net earnings from discontinued operations	$	70,588

73

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

7.    SEGMENTED INFORMATION

We implemented a new organizational structure during the third quarter of 2015 and we have three reportable segments effective October 1, 2015.

•OEM Solutions

•Enterprise Solutions

•Cloud and Connectivity Services

Our segments have changed from those reported at December 31, 2014 when we reported two segments. We have not restated our comparative information as the operations related to Cloud and Connectivity Services that were formerly included in the Enterprise Solutions segment were not material prior to 2015.

As we do not evaluate the performance of our operating segment based on segment assets, management does not classify asset information on a segmented basis. Despite the absence of discrete financial information we do measure our revenue based on other forms of categorization such as by the geographic distribution in which our products are sold.

REVENUE AND GROSS MARGIN BY SEGMENT

	Year ended December 31, 2015
	OEM Solutions			Enterprise Solutions			Cloud and Connectivity Services			Total
Revenue	$	523,366		$	63,072		$	21,360		$	607,798
Cost of goods sold	371,559			29,945			12,439			413,943
Gross margin	$	151,807		$	33,127		$	8,921		$	193,855
Gross margin %	29.0		%	52.5		%	41.8		%	31.9		%
Expenses										183,741
Earnings from operations										$	10,114
Total assets										$	546,332

	Year ended December 31, 2014
	OEM Solutions			Enterprise Solutions			Cloud and Connectivity Services		Total
Revenue	$	476,650		$	71,873		$	—	$	548,523
Cost of goods sold	336,132			33,412			—		369,544
Gross margin	$	140,518		$	38,461		$	—	$	178,979
Gross margin %	29.5		%	53.5		%	—		32.6		%
Expenses									185,573
Loss from operations									$	(6,594	)
Total assets									$	515,364

74

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

	Year ended December 31, 2013
	OEM Solutions			Enterprise Solutions			Cloud and Connectivity Services		Total
Revenue	$	382,016		$	59,844		$	—	$	441,860
Cost of goods sold	266,867			29,352			—		296,219
Gross margin	$	115,149		$	30,492		$	—	$	145,641
Gross margin %	30.1		%	51.0		%	—		33.0		%
Expenses									163,305
Loss from operations									$	(17,664	)
Total assets									$	512,000

REVENUE BY GEOGRAPHICAL REGION

	2015		2014		2013
Americas	$	196,476	$	157,803	$	135,560
Europe, Middle East and Africa	116,686		87,629		91,839
Asia-Pacific	294,636		303,091		214,461
	$	607,798	$	548,523	$	441,860

PROPERTY AND EQUIPMENT BY GEOGRAPHICAL REGION

	2015		2014
Americas	$	15,324	$	9,477
Europe, Middle East and Africa	8,171		6,760
Asia-Pacific	5,452		4,480
	$	28,947	$	20,717

8.    RESEARCH AND DEVELOPMENT

The components of research and development costs consist of the following:

	2015			2014			2013
Gross research and development	$	74,599		$	82,649		$	75,980
Government tax credits	(579		)	(1,712		)	(2,868		)
	$	74,020		$	80,937		$	73,112

75

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

9.    RESTRUCTURING

The following table provides the activity in the restructuring liability:

	2015			2014
Balance, beginning of year	$	348		$	88
Expensed in year	951			1,598
Disbursements	(894		)	(1,261		)
Foreign exchange	(32		)	(77		)
Balance, end of year	$	373		$	348
Classification:
Accounts payable and accrued liabilities	$	373		$	348
By restructuring initiative:
June 2015	$	48		$	—
June 2014	325			270
May 2009 and prior	—			78
	$	373		$	348

In June 2015, management implemented a plan to realign responsibilities within our Enterprise Solutions segment to reflect the natural evolution of our business and to provide dedicated focus on our AirLink gateways business and on integrating recent acquisitions with our AirVantage cloud and connectivity capabilities, in order to accelerate services revenue growth. We recorded $590 in severance and other related costs associated with this reorganization. The remaining liability is expected to be paid out by February 2016. During the year ended December 31, 2015, we recorded additional restructuring expenses of $361 related to prior initiatives.

During the year ended December 31, 2014, we made the decision to reduce the scope of our 2G chipset development activities and recorded $1,430 in related severance and other costs.

10.    OTHER INCOME (EXPENSE)

The components of other income (expense) for the years ended December 31 were as follows:

	2015			2014			2013
Interest income	$	269		$	1,009		$	237
Interest expense	(154		)	(134		)	(345		)
Other	—			(21		)	10
	$	115		$	854		$	(98	)

76

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

11.    INCOME TAXES

The components of earnings (loss) before income taxes consist of the following:

	2015			2014			2013
Continuing operations:
Canadian	$	2,611		$	3,604		$	6,497
Foreign	(4,225		)	(21,734		)	(20,436		)
	(1,614		)	(18,130		)	(13,939		)
Discontinued operations:
Canadian	—			—			80,395
Foreign	—			—			14,488
	—			—			94,883
Earnings (loss) before income taxes	$	(1,614	)	$	(18,130	)	$	80,944

The income tax expense (recovery) consists of:

	2015			2014			2013
Canadian:
Current	$	11		$	(1,165	)	$	64
Deferred	(2,086		)	(2,510		)	10,614
	(2,075		)	(3,675		)	10,678
Foreign:
Current	$	5,511		$	2,630		$	9,646
Deferred	(2,376		)	(232		)	5,582
	3,135			2,398			15,228
Total:
Current	$	5,522		$	1,465		$	9,710
Deferred	(4,462		)	(2,742		)	16,196
	$	1,060		$	(1,277	)	$	25,906

Classification:
Income tax expense (recovery) — continuing operations	$	1,060	$	(1,277	)	$	1,611
Income tax expense — discontinued operations	—		—			24,295
	$	1,060	$	(1,277	)	$	25,906

77

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The reconciliation of income taxes calculated at the statutory rate to the actual income tax provision for the years ended December 31 was as follows:

	2015			2014			2013
Income tax expense (recovery) at Canadian statutory income tax rates of 26.01% (2014 - 26.02%; 2013 - 25.79%)	$	(421	)	$	(4,733	)	$	20,872
Increase (decrease) in income taxes for:
Permanent and other differences	(464		)	(227		)	(2,339		)
Change in statutory/foreign tax rates	(979		)	(2,930		)	(1,210		)
Change in valuation allowance	1,952			5,051			8,875
Stock-based compensation expense	1,206			1,385			(150		)
Adjustment to prior years	(234		)	177			(142		)
Income tax expense (recovery)	$	1,060		$	(1,277	)	$	25,906

Deferred tax assets and liabilities

The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities were as follows at December 31:

	2015			2014
Deferred income tax assets (liabilities)
Property and equipment	$	2,532		$	3,014
Non capital loss carry-forwards	76,183			74,269
Capital loss carry-forwards	4,487			4,778
Scientific research and development expenses and credits	21,988			23,250
Reserves and other	13,716			12,086
Acquired Intangibles	(9,498		)	1,629
	109,408			119,026
Valuation allowance	106,210			110,802
	$	3,198		$	8,224

	2015			2014
Classification:
Assets
Current	$	4,735		$	4,779
Non-current	10,130			3,898
Liabilities
Non-current	(11,667		)	(453		)
	$	3,198		$	8,224

At December 31, 2015, we have provided for a valuation allowance on our deferred tax assets of $106,210 (2014 - $110,802).

At December 31, 2015, we have Canadian allowable capital loss carry-forwards of $11,519 that are available, indefinitely, to be deducted against future Canadian taxable capital gains.  In addition, we have investment tax credits of $20,208 and $8,529 available to offset future Canadian federal and provincial income taxes payable, respectively.  Of these amounts, $670 and $472, respectively, are associated with windfall tax benefits and will be recorded as additional paid-in-capital when realized. The investment tax

78

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

credits expire between 2016 and 2035.  At December 31, 2015, our U.S. subsidiary has $6,486 of California research & development tax credits which may be carried forward indefinitely.  The amounts are after the estimated utilization from the sale of AirCard business described below.

At December 31, 2015, net operating loss carry-forwards for our foreign subsidiaries were $8,291 for U.S. income tax purposes that expire between 2020 and 2023, $91 for Hong Kong income tax purposes, $17,693 for Sweden income tax purposes, $559 for Luxembourg income tax purposes, and $196,938 for French income tax purposes.  The Hong Kong, Sweden, Luxembourg and French net operating loss carry-forward may be carried forward indefinitely. Our foreign subsidiaries may be limited in their ability to use foreign net operating losses in any single year depending on their ability to generate significant taxable income.  In addition, the utilization of the U.S. net operating losses is also subject to ownership change limitations provided by U.S. federal and specific state income tax legislation.  The amount of French net operating losses deducted each year is limited to €1.0 million plus 50% of French taxable income in excess of €1.0 million. Our French net operating losses carry-forward is subject to the “continuity of business” requirement.  Our French subsidiaries also have research tax credit carried forward of $6,613 as at December 31, 2015.  The French research tax credit may be used to offset against corporate income tax and if any credit is not fully utilized within a three year period following the year the research tax credit is earned, it may be refunded by the French tax authorities.  Tax loss and research tax credit carry-forwards are denominated in the currency of the countries in which the respective subsidiaries are located and operate.  Fluctuations in currency exchange rates could reduce the U.S. dollar equivalent value of these tax loss and research tax credit carry forwards in future years.

In assessing the realizability of our deferred tax assets, management considers 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 periods in which temporary differences become deductible and the loss carry-forwards or tax credits can be utilized.  Management considers projected future taxable income and tax planning strategies in making our assessment.

On the disposition of the AirCard assets to Netgear (note 6), we utilized $27,680 of Canadian scientific research and development expenditures, $44 of Canadian allowable capital loss, $2,621 of Canadian Federal and Provincial investment tax credits, $4,401 and $1,555 of U.S. Federal and California net operating loss, respectively, and $2,439 of U.S. Federal research & development tax credit.

No provision for taxes have been provided on undistributed foreign earnings, as it is the company’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries. It is not practical to estimate the income tax liability that might be incurred if there is a change in management’s intention in the event that a remittance of such earnings occurs in the future.

Accounting for uncertainty in income taxes

At December 31, 2015, we had gross unrecognized tax benefits of $4,346 (2014 — $5,913).  Of this total, $879 (2014 — $2,429) represents the amount of unrecognized tax benefits that, if recognized, would favorably impact our effective tax rate.

79

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

Below is a reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31:

	2015			2014
Unrecognized tax benefits, beginning of year	$	5,913		$	8,304
Increases — tax positions taken in prior periods	78			61
Increases — tax positions taken in current period	115			15
Settlements and lapses of statute of limitations	(1,760		)	(2,467		)
Unrecognized tax benefits, end of year	$	4,346		$	5,913

We recognize interest expense and penalties related to unrecognized tax benefits within the provision for income tax expense on the consolidated statement of operations.  At December 31, 2015, we had accrued $1,044 (2014 - $1,305) for interest and penalties.

In the normal course of business, we are subject to audit by the Canadian federal and provincial taxing authorities, by the U.S. federal and various state taxing authorities and by the taxing authorities in various foreign jurisdictions.  Tax years ranging from 2004 to 2015 remain subject to examination in Canada, the United States, the United Kingdom, France, Germany, Australia, China, Hong Kong, Brazil, South Africa, Japan, Korea, Taiwan, Italy, Sweden, Norway, India, Spain, and Luxembourg. 

The Company regularly engages in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. The Company believes it is reasonably possible that certain tax matters may be concluded in the next 12 months. The Company estimates that the unrecognized tax benefits at December 31, 2015 could be increased by approximately $162 in the next 12 months.

12.STOCK-BASED COMPENSATION PLANS

(a)    Stock-based compensation expense:

	2015		2014		2013
Cost of goods sold	$	630	$	519	$	406
Sales and marketing	2,151		1,868		1,862
Research and development	1,422		1,809		1,433
Administration	4,739		5,208		4,289
Continuing operations	8,942		9,404		7,990
Discontinued operations	—		—		1,357
	$	8,942	$	9,404	$	9,347
Stock option plan	2,090		2,250		2,548
Restricted stock plan	6,852		7,154		6,799
	$	8,942	$	9,404	$	9,347

(b)    Stock option plan

Under the terms of our Stock Option Plan (the “Plan”), our Board of Directors may grant options to employees, officers and directors.  The maximum number of shares available for issue under the Plan is the lesser of 10% of the number of issued and outstanding common shares from time to time or 7,000,000 common shares.  Based on the number of shares outstanding as at December 31, 2015, stock options exercisable into 2,267,809 common shares are available for future allocation under the Plan.

80

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The Plan provides that the exercise price of an option will be determined on the date of grant and will not be less than the closing market price of our stock at that date.  Options generally vest over four years, with the first 25% vesting at the first anniversary date of the grant and the balance vesting in equal amounts at the end of each month thereafter.  We determine the expiry date of each option at the time it is granted, which cannot be more than five years after the date of the grant.

The fair value of share options was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2015			2014			2013
Risk-free interest rate	0.97		%	1.25		%	0.89		%
Annual dividends per share	Nil			Nil			Nil
Expected stock price volatility	44		%	46		%	50		%
Expected option life (in years)	4.0			4.0			4.0
Average fair value of options granted (in dollars)	$	10.64		$	6.86		$	4.42

There is no dividend yield because we do not pay, and do not plan to pay, cash dividends on our common shares.  The expected stock price volatility is based on the historical volatility of our average monthly stock closing prices over a period equal to the expected life of each option grant.  The risk-free interest rate is based on yields from risk-free instruments with a term equal to the expected term of the options being valued.  The expected life of options represents the period of time that the options are expected to be outstanding based on historical data of option holder exercise and termination behavior.  We estimate forfeitures at the time of grant and, if necessary, revise that estimate if actual forfeitures differ and adjust stock-based compensation expense accordingly.

The following table presents stock option activity for the years ended December 31:

	Number of		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	Options		Cdn.$	U.S.$	In Years	U.S.$
Outstanding, December 31, 2012	2,355,877		9.89	9.96	2.5	735
Granted	642,025		11.92	11.22
Exercised	(965,228	)	8.81	8.29		5,425
Forfeited	(495,088	)	15.14	14.25
Outstanding, December 31, 2013	1,537,586		10.37	9.76	3.1	22,164
Granted	300,150		21.57	18.57
Exercised	(686,384	)	10.64	9.15		10,535
Forfeited	(7,295	)	11.83	10.18
Outstanding, December 31, 2014	1,144,057		13.94	12.00	2.9	40,550
Granted	218,331		41.62	29.94
Exercised	(357,136	)	14.42	10.37		6,813
Forfeited	(39,341	)	23.74	17.09
Outstanding, December 31, 2015	965,911		21.47	15.44	2.5	3,541

The intrinsic value of outstanding stock options is calculated as the quoted market price of the stock at the balance sheet date, or date of exercise, less the exercise price of the option.

81

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The following table summarizes the stock options outstanding and exercisable at December 31, 2015:

	Options Outstanding				Options Exercisable
Range of	Number of	Weighted Average Remaining Option Life	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
Exercise Prices	Options	(years)	Cdn.$	U.S.$	Exercisable	Cdn.$	U.S.$
$5.38 – $8.45 U.S. $7.48 – $11.75 Cdn	293,562	1.5	10.62	7.64	206,966	10.41	7.49
$8.46 – $11.72 U.S. $11.76 – $16.28 Cdn	237,441	2.0	15.52	11.17	138,421	15.41	11.09
$11.73 – $19.46 U.S. $16.29 – $27.05 Cdn	228,609	3.2	23.16	16.66	67,859	22.92	16.49
$19.47 – $33.60 U.S. $27.06 – $46.71 Cdn	206,299	4.1	41.86	30.12	5,276	33.50	24.10
	965,911	2.5	21.47	15.44	418,522	14.38	10.35

The options outstanding at December 31, 2015 expire between February 14, 2016 and November 9, 2020.

As at December 31, 2015, the unrecognized stock-based compensation cost related to the non-vested stock options was $3,171 (2014 — $3,369; 2013 — $3,641), which is expected to be recognized over a weighted average period of 2.4 years (2014 — 2.4 years; 2013 — 2.5 years).

(c)     Restricted share plans

We have two market based restricted share unit plans: one for U.S. employees and one for all non-U.S. employees, and a treasury based restricted share unit plan (collectively, the “RSPs”).  The RSPs further our growth and profitability objectives by providing long-term incentives to certain executives and other key employees and also encourage our objective of employee share ownership through the granting of restricted share units (“RSUs”).  There is no exercise price or monetary payment required from the employees upon the grant of an RSU or upon the subsequent delivery of our common shares (or, in certain jurisdictions, cash in lieu at the option of the Company) to settle vested RSUs.  The form and timing of settlement is subject to local laws.  With respect to the treasury based RSPs, the maximum number of share units outstanding under the Plan shall not exceed 3.5% of the number of issued and outstanding shares. Based on the number of shares outstanding as at December 31, 2015, 601,187 share units are available for future allocation under the Plan. With respect to the two market based RSPs, independent trustees purchase Sierra Wireless common shares over the facilities of the TSX and Nasdaq, which are used to settle vested RSUs.  The existing trust funds are variable interest entities and are included in these consolidated financial statements as treasury shares held for RSU distribution.

Generally, RSUs vest over three years, in equal one-third amounts on each anniversary date of the grant.  RSU grants to employees who are resident in France for French tax purposes will not vest before the second anniversary from the date of grant, and any shares issued are subject to an additional two year tax hold period.

The intrinsic value of outstanding RSUs is calculated as the quoted market price of the stock at the balance sheet date, or date of vesting.

82

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

The following table summarizes the RSU activity for the years ended December 31:

	Number of		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	RSUs		Cdn.$	U.S.$	In years	U.S.$
Outstanding, December 31, 2012	1,224,995		8.71	8.68	1.9	9,746
Granted	843,592		12.09	11.38
Vested / settled	(573,613	)	9.54	8.98		6,456
Forfeited	(52,859	)	9.74	9.17
Outstanding, December 31, 2013	1,442,115		10.59	9.98	1.8	34,867
Granted	342,225		21.67	18.66
Vested / settled	(617,755	)	10.64	9.16		12,364
Forfeited	(4,820	)	13.24	11.40
Outstanding, December 31, 2014	1,161,765		14.56	12.54	1.7	55,118
Granted	230,689		42.16	30.33
Vested / settled	(590,720	)	14.20	10.21		19,494
Forfeited	(23,501	)	30.02	21.60
Outstanding, December 31, 2015	778,233		25.08	18.04	1.8	12,219
Outstanding – vested and not settled	99,552
Outstanding – unvested	678,681
Outstanding, December 31, 2015	778,233

As at December 31, 2015, the total remaining unrecognized compensation cost associated with the RSUs totaled $6,838 (2014 — $7,209; 2013 — $8,058), which is expected to be recognized over a weighted average period of 1.3 years (2014 — 1.1 years; 2013 — 1.8 years).

13.EARNINGS (LOSS) PER SHARE

The following table provides the reconciliation between basic and diluted earnings (loss) per share:

	2015			2014			2013
Net loss from continuing operations	$	(2,674	)	$	(16,853	)	$	(15,550	)
Net earnings from discontinued operations	—			—			70,588
Net earnings (loss)	$	(2,674	)	$	(16,853	)	$	55,038
Weighted average shares used in computation of:
Basic	32,166			31,512			30,771
Assumed conversion	—			—			—
Diluted	32,166			31,512			30,771
Basic and dilutive earnings (loss) per share (in dollars):
Continuing operations	$	(0.08	)	$	(0.53	)	$	(0.50	)
Discontinued operations	—			—			2.29
	$	(0.08	)	$	(0.53	)	$	1.79

As the Company incurred a loss for the year ended December 31, 2015, all equity awards were anti-dilutive and are excluded from the diluted weighted average shares.

83

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

14.    ACCOUNTS RECEIVABLE

The components of accounts receivable at December 31 were as follows:

	2015			2014
Trade receivables	$	99,027		$	92,531
Less: allowance for doubtful accounts	(2,088		)	(2,275		)
	96,939			90,256
Sales taxes receivable	2,096			1,979
Other receivables	17,211			14,564
	$	116,246		$	106,799

The movement in the allowance for doubtful accounts during the years ended December 31 were as follows:

	2015			2014			2013
Balance, beginning of year	$	2,275		$	2,279		$	2,435
Bad debt expense	615			329			1,077
Write-offs and settlements	(792		)	(290		)	(1,242		)
Foreign exchange	(10		)	(43		)	9
	$	2,088		$	2,275		$	2,279

15.    INVENTORIES

The components of inventories at December 31 were as follows:

	2015		2014
Electronic components	$	19,203	$	5,608
Finished goods	13,626		11,837
	$	32,829	$	17,445

16.    PREPAIDS AND OTHER

The components of prepaids and other at December 31 were as follows:

	2015		2014
Inventory advances	$	1,159	$	639
Insurance and licenses	7,601		3,009
Other	5,419		4,178
	$	14,179	$	7,826

84

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

17.    PROPERTY AND EQUIPMENT

The components of property and equipment at December 31 were as follows:

	2015
	Cost		Accumulated amortization		Net book value
Furniture and fixtures	$	1,420	$	867	$	553
Research and development equipment	29,184		21,435		7,749
Production equipment and tooling	40,181		29,161		11,020
Computer equipment	7,256		5,562		1,694
Software	7,134		4,852		2,282
Leasehold improvements	4,456		2,121		2,335
Leased vehicles	947		547		400
Office equipment	2,533		2,132		401
Network equipment	2,828		315		2,513
	$	95,939	$	66,992	$	28,947

	2014
	Cost		Accumulated amortization		Net book value
Furniture and fixtures	$	1,245	$	708	$	537
Research and development equipment	28,217		20,805		7,412
Production equipment and tooling	34,590		27,212		7,378
Computer equipment	6,053		4,770		1,283
Software	5,476		4,178		1,298
Leasehold improvements	3,244		1,412		1,832
Leased vehicles	1,111		663		448
Office equipment	2,594		2,065		529
	$	82,530	$	61,813	$	20,717

During the year ended December 31, 2014, the Company decided to reduce the scope of its 2G chipset development activities, resulting in a $611 impairment to production equipment and tooling. For the year ended December 31, 2015, no impairment was recognized relating to property and equipment.

Amortization expense relating to property and equipment was $8,479, $8,974, and $10,057 for the years ended December 31, 2015, 2014, and 2013, respectively.

85

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

18.    INTANGIBLE ASSETS

The components of intangible assets at December 31 were as follows:

	2015
	Cost		Accumulated amortization		Net book value
Patents and trademarks	$	14,285	$	8,701	$	5,584
Licenses	54,622		53,143		1,479
Intellectual property	17,622		9,231		8,391
Customer relationships	89,638		35,543		54,095
Brand	5,787		252		5,535
In-process research and development	12,984		3,818		9,166
	$	194,938	$	110,688	$	84,250

	2014
	Cost		Accumulated amortization		Net book value
Patents and trademarks	$	14,919	$	8,114	$	6,805
Licenses	58,302		54,866		3,436
Intellectual property	8,418		7,081		1,337
Customer relationships	52,989		31,060		21,929
In-process research and development	8,498		4,112		4,386
	$	143,126	$	105,233	$	37,893

Estimated annual amortization expense for the next 5 years ended December 31 are as follows:

2016	$	12,441
2017	12,003
2018	11,206
2019	9,420
2020	7,692

During the year ended December 31, 2014, the Company decided to reduce the scope of its 2G chipset development activities, resulting in a $3,145 impairment to licenses and in-process research and development. For the year ended December 31, 2015, no impairment was recognized relating to intangible assets.

Amortization expense relating to intangible assets was $11,737, $14,543, and $18,239 for the years ended December 31, 2015, 2014, and 2013, respectively.

The weighted-average remaining useful lives of intangible assets was 8.7 years as at December 31, 2015.

At December 31, 2015, a net carrying amount of $8,404 (December 31, 2014 - $1,288) included in intangible assets was not subject to amortization.

86

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

19.    GOODWILL

We assessed the recoverability of goodwill as at September 30, 2015 for each of the identified reporting units and determined that the fair value of each of the two reporting units exceeded its carrying value. Therefore, the second step of the impairment test that measures the amount of an impairment loss by comparing the implied fair market value with the carrying amount of goodwill for each reporting unit was not required. 

We implemented a new organization structure that resulted in three reportable segments effective October 1, 2015. Accordingly, we reassigned goodwill using a relative fair value allocation approach and updated our goodwill valuation analysis. There was no impairment of goodwill during the years ended December 31, 2015, 2014 and 2013.

The changes in the carrying amount of goodwill for the years ended December 31 were as follows:

	2015			2014
Balance at beginning of year	$	103,966		$	102,718
Goodwill acquired (note 5(c), 5(d) and 5(e))	60,478			8,697
Foreign currency translation adjustments	(7,956		)	(7,449		)
	$	156,488		$	103,966
OEM Solutions	$	103,567		$	80,699
Enterprise Solutions	24,993			23,267
Cloud and Connectivity Services	27,928			—
	$	156,488		$	103,966

20.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The components of accounts payable and accrued liabilities at December 31 were as follows:

	2015		2014
Trade payables	$	81,879	$	75,452
Inventory commitment reserve	1,866		1,777
Accrued royalties	9,750		18,895
Accrued payroll and related liabilities	10,879		11,300
Taxes payable (including sales taxes)	2,501		4,742
Product warranties (note 26(b)(iii))	7,362		5,951
Other	14,300		10,079
	$	128,537	$	128,196

87

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

21.    LONG-TERM OBLIGATIONS

The components of long-term obligations at December 31 were as follows:

	2015		2014
Accrued royalties	$	35,451	$	22,101
Other	8,902		4,507
	$	44,353	$	26,608

22.    ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss at December 31, net of taxes, were as follows:

	2015			2014
Release of foreign currency translation relating to acquisition of non-controlling interest	$	178		$	178
Translation adjustment related to change in functional currency	(728		)	(728		)
Foreign currency translation adjustments	(7,428		)	(5,415		)
	$	(7,978	)	$	(5,965	)

During the second quarter of 2015, we classified an intercompany EUR denominated loan as a net investment in a foreign subsidiary which resulted in foreign exchange gains and losses on revaluation being prospectively classified in other comprehensive income.

23.SHARE CAPITAL

On February 4, 2016, we received approval from the TSX of our Notice of Intention to make a Normal Course Issuer Bid (the "Bid"). Pursuant to the Bid, we may purchase for cancellation up to 3,149,199 of our common shares, or approximately 9.7% of the common shares outstanding as of the date of the announcement. The Bid commenced on February 9, 2016 and will terminate on the earlier of: (i) February 8, 2017, (ii) the date the Company completes its purchases pursuant to the notice of intention filed with the TSX, or (iii) the date of notice by the Company of termination of the Bid. As of February 29, 2016, we had purchased 549,583 common shares at an average price of $11.18 per share.

On February 29, 2016, we established an automatic share purchase plan in connection with the previously announced Bid with a designated broker to allow for the purchase of Common Shares under the NCIB at times when the Company would ordinarily not be permitted to purchase shares due to regulatory restrictions.

On February 6, 2013, we received regulatory approval allowing us to purchase for cancellation up to 1,529,687 of our common shares by a normal course issuer bid (“the Bid”) on the Toronto Stock Exchange and NASDAQ Global Market.  The Bid commenced on February 14, 2013 and terminated on February 13, 2014.  During the course of the Bid, no purchases and cancellations were made in 2014 (2013 - 510,439 common shares).

88

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

24.    FAIR VALUE MEASUREMENT

(a)   Fair value presentation

An established fair value hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement.  There are three levels of inputs that may be used to measure fair value:

Level 1	—	Quoted prices in active markets for identical assets or liabilities.
Level 2	—	Observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	—	Inputs that are generally unobservable and are supported by little or no market activity and that are significant to the fair value determination of the assets or liabilities.

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate their fair value due to the immediate or short-term maturity of these financial instruments. Based on borrowing rates currently available to us for loans with similar terms, the carrying values of our obligations under capital leases, long-term obligations and other long-term liabilities approximate their fair values.

We have contingent consideration related to the acquisitions of Accel and MobiquiThings in 2015 that was measured using unobservable inputs which represents a Level 3 measurement within the fair value hierarchy. The contingent consideration is measured at each reporting period and any changes in the fair value are recorded in earnings.

(b)   Credit Facilities

We have a $10 million revolving term credit facility ("Revolving Facility") with Toronto Dominion Bank and the Canadian Imperial Bank of Commerce. The expiry date on this Revolving Facility has been extended to January 31, 2017. The Revolving Facility is for working capital requirements, is secured by a pledge against all of our assets and is subject to borrowing base limitations. As at December 31, 2015, there were no borrowings under the Revolving Facility.

(c)    Letters of credit

We have access to a revolving standby letter of credit facility of $10 million from Toronto Dominion Bank. The credit facility is used for the issuance of letters of credit for project related performance guarantees and is guaranteed by Export Development Canada. As at December 31, 2015, there were no letters of credit issued against the revolving standby letter of credit facility.

89

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

25.    FINANCIAL INSTRUMENTS

Financial Risk Management

Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities.

We have exposure to the following business risks:

We maintain substantially all of our cash and cash equivalents with major financial institutions or invest in government instruments. Our deposits with banks may exceed the amount of insurance provided on such deposits.

We outsource manufacturing of our products to third parties and, accordingly, we are dependent upon the development and deployment by third parties of their manufacturing abilities. The inability of any supplier or manufacturer to fulfill our supply requirements could impact future results. We have supply commitments to our contract manufacturers based on our estimates of customer and market demand. Where actual results vary from our estimates, whether due to execution on our part or market conditions, we are at risk.

Financial instruments that potentially subject us to concentrations of credit risk are primarily accounts receivable. We perform on-going credit evaluations of our customer’s financial condition and require letters of credit or other guarantees whenever deemed appropriate.

Although a significant portion of our revenues are in U.S. dollars, we incur operating costs that are denominated in other currencies. Fluctuations in the exchange rates between these currencies could have a material impact on our business, financial condition and results of operations.

We are generating and incurring an increasing portion of our revenue and expenses, respectively, outside of North America including Europe, the Middle East and Asia.  To manage our foreign currency risks, we may enter into foreign currency forward and options contracts should we consider it to be advisable to reduce our exposure to future foreign exchange fluctuations.  As at December 31, 2015 and 2014, we had no such contracts in place.

We are subject to risks typical of an international business including, but not limited to, differing economic conditions, changes in political climate, differing tax structures other regulations and restrictions and foreign exchange rate volatility.  Accordingly, our future results could be materially affected by changes in these or other factors.

90

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

26.    COMMITMENTS AND CONTINGENCIES

(a) Operating leases

We have entered into operating leases for property and equipment.  The minimum future payments under various operating leases for our continuing operations in each of the years ended December 31 is as follows:

2016	$	5,224
2017	4,815
2018	3,735
2019	3,099
2020	2,527
Subsequent years	1,978
	$	21,378

(b) Contingent liability on sale of products

(i) Under license agreements, we are committed to make royalty payments based on the sales of products using certain technologies. We recognize royalty obligations as determinable in accordance with agreement terms. Where agreements are not finalized, we have recognized our current best estimate of the obligation. When the agreements are finalized or the potential obligation becomes statute barred, the estimate will be revised accordingly.

(ii) We are a party to a variety of agreements in the ordinary course of business under which we may be obligated to indemnify a third party with respect to certain matters. Typically, these obligations arise as a result of contracts for sale of our products to customers where we provide indemnification against losses arising from matters such as potential intellectual property infringements and product liabilities. The impact on our future financial results is not subject to reasonable estimation because considerable uncertainty exists as to whether claims will be made and the final outcome of potential claims. To date, we have not incurred material costs related to these types of indemnifications.

(iii) We accrue product warranty costs, when we sell the related products, to provide for the repair or replacement of defective products. Our accrual is based on an assessment of historical experience and on management’s estimates. An analysis of changes in the liability for product warranties follows: 

	2015			2014
Balance, beginning of year	$	5,951		$	5,861
Provisions	4,180			5,260
Expenditures	(2,769		)	(5,310		)
Liabilities from acquisition of In Motion	—			140
Balance, end of year	$	7,362		$	5,951

91

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

(c) Other commitments

We have entered into purchase commitments totaling approximately $87,631 net of related electronic components inventory of $18,390 (December 31, 2014 — $85,192, net of electronic components inventory of $5,079), with certain contract manufacturers under which we have committed to buy a minimum amount of designated products between January 2016 and June 2016.  In certain of these agreements, we may be required to acquire and pay for such products up to the prescribed minimum or forecasted purchases.

(d) Legal proceedings

We are from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of our business.  We accrue for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. These accruals are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and technical experts and other information and events pertaining to a particular matter.  To the extent there is a reasonable possibility (within the meaning of ASC 450, Contingencies) that the losses could exceed the amounts already accrued for those cases for which an estimate can be made, management believes that the amount of any such additional loss would not be material to our results of operations or financial condition.

In some instances, we are unable to reasonably estimate any potential loss or range of loss.  The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on the company. There are many reasons why we cannot make these assessments, including, among others, one or more of the following: in the early stage of a proceeding, the claimant is not required to specifically identify the patent that has allegedly been infringed; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery not having been started or being incomplete; the complexity of the facts that are in dispute (e.g., once a patent is identified, the analysis of the patent and a comparison to the activities of the company is a labor-intensive and highly technical process); the difficulty of assessing novel claims; the parties not having engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and the often slow pace of patent litigation.

We are required to apply judgment with respect to any potential loss or range of loss in connection with litigation.  While we believe we have meritorious defenses to the claims asserted against us in our currently outstanding litigations, and intend to defend ourselves vigorously in all cases, in light of the inherent uncertainties in litigation there can be no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by us for those cases for which an estimate can be made. Losses in connection with any litigation for which we are not presently able to reasonable estimate any potential loss or range of loss could be material to our results of operations and financial condition.

In February 2015, a patent holding company, Wetro Lan, filed a patent infringement lawsuit in the United States District Court for the Eastern District of Texas, asserting patent infringement by us of one patent which expired in 2012. The lawsuit makes certain allegations concerning our AirLink router products which were sold prior to the patent’s expiry. The lawsuit was dismissed with prejudice in the fourth quarter of 2015 and did not have a material impact on our operating results.

92

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

On January 6, 2014, we received notice from the International Chamber of Commerce ("ICC") of arbitration proceedings launched by Nokia against us, for alleged unpaid royalties of approximately €32 million. On November 24, 2015, following a hearing, we received notice from the ICC of a decision in our favour in the proceedings.

In January 2012, a patent holding company, M2M Solutions LLC ("M2M"), filed a patent infringement lawsuit in the United States District Court for the District of Delaware asserting patent infringement by us and our competitors. The lawsuit makes certain allegations concerning the AirPrime embedded wireless module products, related AirLink products and related services sold by us for use in M2M communication applications. The claim construction order has determined one of the two patents-in-suit to be indefinite and therefore invalid. A motion for summary judgment of non-infringement and invalidity has been filed by us and a decision is currently pending. We anticipate that M2M will not proceed with its infringement case against us, but will eventually appeal the claim construction order. Trials against two other defendants in related cases involving the same patents are scheduled for March and April 2016, respectively. Any appeals from the claim construction order may follow the disposition of these trials. In August 2014, M2M filed a second patent infringement lawsuit against us in the same court with respect to a recently issued patent held by M2M, which patent is a continuation of one of the patents-in-suit in the original lawsuit filed against us by M2M. The lawsuit has been administratively closed pending the result of several Inter Partes Review proceedings filed by us and the other defendants with the United States Patent and Trial Appeal Board (PTAB) in August and October of 2015. The PTAB has declined to institute proceedings in respect of the first two of these filings and has yet to make a determination on the remaining three filings, including ours.

Although there can be no assurance that an unfavorable outcome would not have a material adverse effect on our operating results, liquidity or financial position, we believe the claims made in the foregoing legal proceedings are without merit and intend to defend ourselves and our products vigorously in all cases.

IP Indemnification Claims

We have been notified by one or more of our customers in each of the following matters that we may have an obligation to indemnify them in respect of the products we supply to them:

In May 2013, a patent holding company, Adaptix, Inc., filed a patent infringement lawsuit in the United States District Court for the Eastern District of Texas against one of our customers asserting patent infringement in relation to our customer’s products, which may include certain LTE products which utilize modules sold to them by us. In March 2014, the lawsuit was transferred to the United States District Court for the Northern District of California. The lawsuit was dismissed with prejudice in June 2015 and we do not believe that this outcome will have a material adverse effect on our operating results. In June 2015, Adaptix filed amended complaints in the Eastern District of Texas against two carriers asserting patent infringement against them in relation to certain cellular communication devices sold by the carriers for use on their 4G LTE wireless networks, which products include certain products which may utilize modules sold to the original equipment manufacturer by us and certain AirCard products sold to the carriers by us prior to the transfer of the AirCard business to Netgear. The two cases have been consolidated and the claim construction hearing is scheduled for July 2016, with the first trial for the consolidated cases to occur in May 2017.

In February 2012, a patent holding company, Intellectual Ventures (comprised of Intellectual Ventures I LLC and Intellectual Ventures II LLC), filed a patent infringement lawsuit in the United States District Court for the District of Delaware against two of our customers asserting patent infringement in relation to several of our customer's products and services, including the mobile hotspots sold to them by us prior to the transfer of the AirCard business to Netgear. The lawsuit was split into several

93

SIERRA WIRELESS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. dollars, except where otherwise stated)

separate lawsuits and amended complaints were filed in October 2013. We are currently intervening in two of the cases in defense of our products with respect to one patent-in-suit alleged to relate to Wi-Fi standards. The lawsuits are in the discovery stage. A claim construction order was issued in March 2015.

A patent holding company, Eon Corp. IP Holdings, LLC ("Eon"), filed a patent infringement lawsuit against one of our customers in October 2010 in the United States District Court for the Eastern District of Texas, which was subsequently transferred to the United States District Court for the Northern District of California. The lawsuit involves assertions of patent infringement in relation to wireless modems sold to our customer by us prior to the transfer of the AirCard business to Netgear. A claim construction order was issued in July 2013, and the defendant's motion for summary judgment of non-infringement was granted by the Court in March 2014. In March 2015, this judgment was affirmed by the United States Court of Appeals for the Federal Circuit. Eon filed a patent litigation lawsuit against another of our former AirCard customers in January 2012 in the United States District Court for the District of Puerto Rico involving the same patent-in-suit in the California lawsuit plus three additional patents. This lawsuit was transferred in part to the District of Delaware with respect to claims related to one of the four patents-in-suit, which claims related to interactive television. The Delaware case has since been closed. The claim construction order in the Puerto Rico case was issued in April 2014. The case was closed in September 2014 following the filing of a joint notice of stipulation of dismissal without prejudice.

Although there can be no assurance that an unfavorable outcome would not have a material adverse effect on our operating results, liquidity or financial position, we believe the claims made in the foregoing legal proceedings are without merit and intend to defend ourselves and our products vigorously in all cases.

We are engaged in certain other claims, legal actions and arbitration matters, all in the ordinary course of business, and believe that the ultimate outcome of these claims, legal actions and arbitration matters will not have a material adverse effect on our operating results, liquidity or financial position.

94

Executive Officers	Directors
Jason W. Cohenour	Gregory D. Aasen (3)
President and Chief Executive Officer	Corporate Director
David G. McLennan	Robin A. Abrams (1), (2)
Chief Financial Officer and Secretary	Corporate Director
Philippe Guillemette	Paul G. Cataford (1), (2), (3)
Chief Technology Officer	Corporate Director
Bill G. Dodson	Charles E. Levine (1), (3)
Senior Vice President, Operations	Corporate Director
A. Daniel Schieler	Thomas Sieber (1), (2)
Senior Vice President and General Manager, OEM Solutions	Corporate Director
Emmanuel Walckenaer	Kent Thexton (3)
Senior Vice President and General Manager, Cloud & Connectivity Services	Chairman of the Board
Pierre Teyssier	Jason W. Cohenour
Senior Vice President, Purchasing	President and Chief Executive Officer
	Sierra Wireless, Inc.
Jason L. Krause
Senior Vice President and General Manager, Enterprise Solutions	(1) Audit Committee
	(2) Governance and Nominating Committee
	(3) Human Resources Committee

General Counsel	Transfer Agent
Blake, Cassels & Graydon LLP	Computershare Investor Services Inc.
Vancouver, BC	Vancouver, BC
US Counsel	Share Information
Skadden, Arps, Slate, Meagher & Flom LLP	The common shares of Sierra Wireless, Inc. are listed for trading under the symbol SW on The Toronto Stock Exchange and under SWIR on The Nasdaq Global Market.
Toronto, Ontario		Head Office
		Sierra Wireless, Inc.
Intellectual Property Lawyers		13811 Wireless Way
Nixon Peabody LLP		Richmond
Palo Alto, California	Annual General Meeting	British Columbia
	The Annual General Meeting for the shareholders of Sierra Wireless, Inc. will be held on May 19, 2016 at 3:00 p.m. (Pacific) at the Company's head office in Richmond, British Columbia.	Canada V6V 3A4
Auditors
KPMG LLP		Telephone :: 604 231 1100
Vancouver, BC
		Facsimile :: 604 231 1109
		Website :: www.sierrawireless.com