10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
 

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2015
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________

Commission file number: 000-22920
 

NUMEREX CORP.

(Exact name of registrant as specified in its charter)

Pennsylvania	11-2948749
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3330 Cumberland Parkway, Suite 700

Atlanta, GA 30339-2119

(Address of principal executive offices) (Zip Code)

(770) 693-5950

(Registrant’s telephone number, including area code)
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.     Yes þ No o

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

Large accelerated filer o	Accelerated filer þ
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of May 8, 2015, 18,984,563 shares of the registrant’s Class A common stock, no par value (being the registrant’s only class of common stock outstanding) were outstanding.

NUMEREX CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	21
Item 4.	Controls and Procedures.	21
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings.	22
Item 1A.	Risk Factors.	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3.	Defaults Upon Senior Securities.	22
Item 4.	Mine Safety Disclosures.	22
Item 5.	Other Information.	22
Item 6.	Exhibits.	22
	SIGNATURES

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NUMEREX CORP. AND SUBSIDIARIES

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.
Index to Financial Statements
		Page
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	4
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2015 and 2014	5
	Unaudited Condensed Consolidated Statement of Shareholders’ Equity for the three months ended March 31, 2015	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	7
	Unaudited Condensed Notes to Consolidated Financial Statements	8

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NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2015			December 31, 2014
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	14,705		$	17,270
Accounts receivable, less allowance for doubtful accounts of $1,786 and $1,106		13,231			12,287
Financing receivables, current		1,666			1,595
Inventory, net of reserve for obsolescence		8,091			8,410
Prepaid expenses and other current assets		2,436			2,329
Deferred tax assets, current		3,161			3,161
TOTAL CURRENT ASSETS		43,290			45,052
Financing receivables, less current portion		2,924			2,984
Property and equipment, net of accumulated depreciation and amortization of $4,385 and $3,815		4,861			4,889
Software, net of accumulated amortization		6,024			6,106
Other intangible assets, net of accumulated amortization		19,124			19,163
Goodwill		44,548			44,548
Deferred tax assets, less current portion		5,967			5,616
Other assets		2,714			2,585
TOTAL ASSETS	$	129,452		$	130,943
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	11,589		$	12,257
Accrued expenses and other current liabilities		2,686			2,471
Deferred revenues		1,889			2,258
Current portion of long-term debt		4,067			4,251
Obligations under capital lease		57			148
TOTAL CURRENT LIABILITIES		20,288			21,385
Long-term debt, less current portion		18,412			19,350
Other liabilities		1,751			1,346
TOTAL LIABILITIES		40,451			42,081
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred stock, no par value; authorized 3,000; none issued		-			-
Class A common stock, no par value; 30,000 authorized; 20,285 and 20,284 issued; 18,993 and 18,992 outstanding		-			-
Class B common stock, no par value; authorized 5,000; none issued		-			-
Additional paid-in capital		99,840			99,056
Treasury stock, at cost, 1,292 shares		(5,352	)		(5,352	)
Accumulated other comprehensive loss		(73	)		(48	)
Accumulated deficit		(5,414	)		(4,794	)
TOTAL SHAREHOLDERS’ EQUITY		89,001			88,862
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	129,452		$	130,943

The accompanying notes are an integral part of these financial statements

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NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share data)

	Three Months Ended March 31,
	2015			2014
Net revenues:
Subscription and support revenues	$	16,529		$	13,886
Embedded devices and hardware		5,149			6,887
Total net revenues		21,678			20,773
Cost of sales, exclusive of a portion of depreciation and amortization shown below:
Subscription and support revenues		6,719			5,359
Embedded devices and hardware		4,853			5,574
Gross profit		10,106			9,840
Operating expenses:
Sales and marketing		3,064			2,954
General and administrative		3,929			3,598
Engineering and development		2,293			1,278
Depreciation and amortization		1,654			1,348
Operating (loss) income		(834	)		662
Interest expense		210			54
Other income, net		(38	)		(1,133	)
(Loss) income from continuing operations before income taxes		(1,006	)		1,741
Income tax (benefit) expense		(386	)		595
(Loss) income from continuing operations, net of income taxes		(620	)		1,146
(Loss) from discontinued operations, net of income taxes		-			(56	)
Net (loss) income		(620	)		1,090
Other items of comprehensive income, net of income taxes:
Foreign currency translation adjustment		(25	)		(4	)
Comprehensive (loss) income	$	(645	)	$	1,086
Basic earnings per share:
(Loss) income from continuing operations	$	(0.03	)	$	0.06
(Loss) income from discontinued operations		0.00			(0.00	)
Net (loss) income	$	(0.03	)	$	0.06
Diluted earnings per share:
(Loss) income from continuing operations	$	(0.03	)	$	0.06
(Loss) income from discontinued operations		0.00			(0.00	)
Net (loss) income	$	(0.03	)	$	0.06
Weighted average shares outstanding used in computing earnings per share:
Basic		18,993			18,853
Diluted		18,993			19,350

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

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NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(in thousands)

	Common Shares		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders’ Equity
Balance at January 1, 2015		20,284	$	99,056		$	(5,352	)	$	(48	)	$	(4,794	)	$	88,862
Equity-based compensation expense		-		783			-			-			-			783
Equity-based compensation plan activity		1		-			-			-			-			-
Value of shares retained to pay employee taxes		-		(2	)		-			-			-			(2	)
Translation adjustment		-		-			-			(25	)		-			(25	)
Other		-		3			-			-			-			3
Net loss		-		-			-			-			(620	)		(620	)
Balance at March 31, 2015		20,285	$	99,840		$	(5,352	)	$	(73	)	$	(5,414	)	$	89,001

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

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NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net (loss) income	$	(620	)	$	1,090
Less (loss) income from discontinued operations, net of income taxes		-			(56	)
(Loss) income from continuing operations, net of income taxes		(620	)		1,146
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		1,881			1,419
Equity-based compensation expense		784			555
Deferred income taxes		(351	)		448
Bad debt expense		140			183
Inventory reserves		134			130
Gain on sale of cost method investment		-			(1,109	)
Other non-cash expense		21			9
Changes in assets and liabilities, net of effects of acquisitions:
Accounts and financing receivables		(1,094	)		(1,605	)
Inventory, net		185			(442	)
Accounts payable		(657	)		(446	)
Deferred revenue		51			56
Other		(154	)		(43	)
Net cash provided by operating activities		320			301
Cash flows from investing activities:
Purchases of property and equipment		(554	)		(847	)
Capitalized software development and purchases of software		(1,119	)		(910	)
Proceeds from sale of cost basis investment		-			1,308
Net cash used in investing activities		(1,673	)		(449	)
Cash flows from financing activities:
Principal payments on debt		(1,121	)		(105	)
Principal payments on capital lease obligations		(90	)		(69	)
Equity-based compensation plan activity		1			182
Payment of employee taxes on equity-based awards		(2	)		(106	)
Net cash used in financing activities		(1,212	)		(98	)
Cash flows from discontinued operations:
Cash provided by operating activities		-			29
Net cash provided by discontinued operations		-			29
Net decrease in cash and cash equivalents		(2,565	)		(217	)
Cash and cash equivalents at beginning of period		17,270			25,603
Cash and cash equivalents at end of period	$	14,705		$	25,386
Supplemental disclosures of cash flow information:
Cash paid for interest	$	191		$	54
Cash paid for income taxes		28			29
Disclosure of non-cash investing and financing activities:
Non cash interest		19			-
Capital expenditures in accounts payable		407			115

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NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

NOTE A – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Numerex Corp. (NASDAQ: NMRX) is a leading provider of interactive and on-demand machine-to-machine (M2M) enterprise solutions enabling the Internet of Things (IoT).  The Company provides its technology and services through its integrated M2M horizontal platforms, which are generally sold on a subscription basis. The Company offers Numerex DNA® that may include hardware and smart Devices, cellular and satellite Network services, and software Applications that are delivered through our M2M platform. The Company also provides business services to enable the development of efficient, reliable, and secure solutions while accelerating deployment. Numerex is ISO 27001 information security-certified, highlighting the Company’s focus on M2M data security, service reliability and around-the-clock support of its customers’ M2M solutions.

We prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, referred to as GAAP, for interim financial information and the Rules and Regulations issued by the Securities Exchange Commission, or SEC, as applicable. These financial statements include all of our accounts and those of our wholly-owned subsidiaries. We have eliminated intercompany transactions and balances in consolidation.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of management, the accompanying financial statements reflect all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, considered necessary for a fair presentation of our financial position as of March 31, 2015 and our operating results and cash flows for the interim periods presented. The accompanying condensed consolidated balance sheet as of December 31, 2014 was derived from our audited financial statements, but does not include all disclosures required by GAAP. The financial information presented herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 which includes information and disclosures not included in this quarterly report.

The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ materially from these estimates. Operating results for the three months ended March 31, 2015, may not be indicative of the results that may be expected for the year ending December 31, 2015 or any future periods.

NOTE B – MERGER

On May 5, 2014, in accordance with the terms and conditions of the merger agreement, we merged our wholly-owned subsidiary with and into Omnilink Systems Inc. (Omnilink) with Omnilink surviving the merger as a wholly-owned subsidiary of Numerex. The purchase price of $37.5 million was composed of a cash payment of $37.3 million and a working capital adjustment of $0.2 million, subject to post-closing purchase price adjustments and escrows as provided in the merger agreement.

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

8

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the closing date of the Omnilink merger (dollars in thousands):

	Fair Value			Estimated Useful Lives
Cash	$	195		n/a
Accounts receivable		2,677		n/a
Inventory		873		n/a
Prepaid and other assets		377		n/a
Property and equipment		1,613		4	(a)
Deferred tax asset		2,400		n/a
Customer relationships		6,056		11
Technology		4,998		14
Trade names		3,632		Indefinite
Goodwill		17,518		Indefinite
Total identifiable assets acquired		40,339
Accounts payable		(1,756	)	n/a
Accrued expenses		(1,037	)	n/a
Deferred revenue		(64	)	n/a
Total liabilities assumed		(2,857	)
Net assets acquired	$	37,482

(a) The weighted average remaining useful life for all property and equipment is approximately four years.

The above fair value purchase price allocations are provisional and subject to change. The total purchase consideration for the merger was allocated to identifiable assets purchased and liabilities assumed based on fair value. The estimated fair value attributed to intangible assets, other than Goodwill, was based on common valuation techniques. The final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible, but no later than one year from the acquisition date. Given the scope of the operational integration and valuation efforts, as well as the complexity presented in the valuation of the tax effects related to tax attributes and other deferred tax items, the valuation of certain assets and liabilities is still being completed. The primary area that is not yet finalized relates to the calculation of deferred taxes and the corresponding effect on the residual value of goodwill. We have recorded estimated net deferred tax assets, pending finalization of Omnilink’s pre-acquisition income tax returns.

The gross amount of accounts receivable in the table above is $2.9 million. Based on the nature and financial strength of the customers, we expect to collect amounts due for the accounts receivable of $2.7 million. Our best estimate at the merger date of the contractual cash flows not expected to be collected is $0.2 million.

The residual allocation to goodwill results from such factors as an assembled workforce, expected significant synergies for market growth and profitability as well as Omnilink’s service and product lines contributing to our becoming the market leader in select M2M vertical markets. The total amount of goodwill will not be deductible for income tax purposes.

NOTE C - INVENTORY

Inventory consisted of the following (in thousands):

	March 31, 2015			December 31, 2014
Raw materials	$	1,663		$	2,228
Finished goods		7,959			7,579
Reserve for obsolescence		(1,531	)		(1,397	)
	$	8,091		$	8,410

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NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015

NOTE D – INTANGIBLE ASSETS

Intangible Assets Other Than Goodwill

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

	As of March 31, 2015									As of December 31, 2014
	Remaining Useful Lives		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased and developed software		1.4	$	11,887	$	(7,134	)	$	4,753	$	11,176	$	(6,409	)	$	4,767
Software in development		n/a		1,271		-			1,271		1,339		-			1,339
Total software				13,158		(7,134	)		6,024		12,515		(6,409	)		6,106
Licenses		0.4		12,763		(11,955	)		808		12,763		(11,886	)		877
Customer relationships		8.3		8,287		(1,594	)		6,693		8,287		(1,359	)		6,928
Technologies		13.1		4,998		(327	)		4,671		4,998		(237	)		4,761
Patents and trademarks		3.9		4,220		(1,778	)		2,442		3,343		(1,657	)		1,686
Trade names		Indefinite		3,632		-			3,632		3,632		-			3,632
Other		n/a		878		-			878		1,279		-			1,279
Total other intangible assets				34,778		(15,654	)		19,124		34,302		(15,139	)		19,163
			$	47,936	$	(22,788	)	$	25,148	$	46,817	$	(21,548	)	$	25,269

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

Amortization expense related to intangible assets was $1.2 million and $1.0 million for the three months ended March 31, 2015 and 2014, respectively. Amortization expense recorded in cost of subscription revenues in the accompanying condensed consolidated statements of operations and comprehensive (loss) income was $0.2 million and $0.1 million for the three months ended March 31, 2015 and 2014, respectively. Additionally, we have capitalized approximately $0.4 million and $0.5 million, respectively of internally generated software development costs for the three months ended March 31, 2015 and 2014 respectively.

NOTE E – INCOME TAXES

We calculate our interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, we make our best estimate of the annual expected effective tax rate and apply that rate to our ordinary year-to-date income or loss.  In addition, we calculate a year-to-date adjustment to increase or decrease our income tax provision to take into account our current expected effective tax rate.  The tax or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

For the three months ended March 31, 2015, we recorded income tax benefit from continuing operations of $0.4 million, as compared to an income tax expense of $0.6 million for the three months ended March 31, 2014.  Our effective tax rates for the three months ended March 31, 2015 and 2014 were 38.4% and 34.2% respectively. The effective tax rate for the three months ended March 31, 2015 and 2014 differed from the federal statutory rate applied to income and losses before income taxes primarily as a result of the effect of expenses that are not deductible for income tax purposes and state income taxes, including the tax effect of changes in effective state income tax rates, partially offset by an income tax benefit on disqualifying dispositions of incentive stock options.

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NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015

We continue to maintain a valuation allowance for deferred tax assets related to certain state and foreign net operating losses, and federal loss carryforwards for which we have determined it is more likely than not expiration will occur before utilization. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2011 through 2014 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from years in which net operating losses have arisen are still open for examination by the tax authorities.

NOTE F – DEBT

Debt consisted of the following (dollars in thousands):

	March 31, 2015		December 31, 2014
Note payable to Silicon Valley Bank, with interest at our option of prime rate or LIBOR rate plus margin	$	22,162	$	23,125
Seller financed note payable, with interest at 4.25%, monthly payments of principal and interest, secured by equipment, due September 2015		317		476
		22,479		23,601
Less current portion of long-term debt		4,067		4,251
Noncurrent portion of long-term debt	$	18,412	$	19,350

On May 5, 2014, we entered into a Second Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank in order to, among other things, establish a term loan of $25.0 million and a revolving line of credit of up to $5.0 million (collectively, the “Credit Facility”). As of March 31, 2015, there was $5.0 million available under the revolving line of credit. The proceeds from the term loan were used to finance the Omnilink merger. See Note B –– Merger.

The maturity date of the loan is May 5, 2019 with regular required quarterly principal payments which began June 30, 2014. The scheduled outstanding principal balance of $5.0 million will be due at maturity if not otherwise repaid earlier by way of voluntary Permitted Prepayments or by mandatory Excess Cash Flow Recapture Payments (as defined in the Loan Agreement).

The interest rate applicable to amounts drawn pursuant to the Loan Agreement is currently 2.75% and is, at our option, determined by reference to the prime rate or LIBOR rate plus a margin established in the Loan Agreement.

Our obligations under the Credit Facility are secured by substantially all of our assets and the assets of our subsidiaries. In addition, we are required to meet certain financial and other restrictive covenants customary with this type of facility, including maintaining a senior leverage ratio, a fixed charge coverage ratio and minimum liquidity availability. We are also prohibited from entering into any debt agreements senior to the Credit Facility and paying dividends. The Amended Loan Agreement contains customary events of default. If a default occurs and is not cured within the applicable cure period or is not waived, any outstanding obligations under the Credit Facility may be accelerated. We were in compliance with all of the Bank’s financial covenants at March 31, 2015.

In connection with our acquisition of a small technology business in October 2012, we entered into a Promissory Note of $1.9 million payable to the sellers of the business. This Promissory Note is subordinate to the Credit Facility, bears interest at the greater of prime plus 1% or 4.25% (4.25% as of March 31, 2015) and is payable in monthly installments through September 2015. As of March 31, 2015, the balance outstanding on the Promissory Note was $0.3 million, all classified as current.

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NUMEREX CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015

NOTE G – NET (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is computed by dividing net (loss) income available to common shareholders by the weighted average number of common shares outstanding during the period excluding the dilutive impact of common stock equivalents. Diluted earnings per share include the effect of all potentially dilutive securities on earnings per share. The dilutive effect of outstanding equity-based compensation awards is computed using the treasury stock method. The computation of diluted earnings per share does not assume exercise of securities that would have an anti-dilutive effect on earnings.

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

	For the Three Months Ended March 31,
	2015			2014
(Loss) income from continuing operations	$	(620	)	$	1,146
Weighted average shares outstanding:
Basic		18,993			18,853
Dilutive effect of common stock equivalents		-			497
Total		18,993			19,350
Anti-dilutive equity-based compensation awards		727			510

NOTE H – RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015

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

In May 2014, the FASB issued new accounting guidance for revenue recognized from contracts with customers. The core principle of the guidance is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance was set to become effective for us for fiscal years, and interim reporting periods within those years, beginning January 1, 2017 and will require retrospective application when adopted. In May 2015, the FASB issued for public comment a proposed Accounting Standards Update (ASU), Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which would defer the effective date of its new revenue recognition standard by one year beginning January 1, 2018. We are currently in the process of evaluating the impact of adoption on our consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

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

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

Overview

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

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

We are a holding company that, acting through our subsidiaries, is one of the leading providers of on-demand and interactive M2M enterprise solutions with a presence predominately in North America. We incorporate the key M2M elements of Device (D), Network (N), and Application (A), to create packaged and custom designed M2M solutions for the enterprise and government markets nationwide. We refer to this combination as Numerex DNA.

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

During the quarter ended March 31, 2015, we had revenues from continuing operations of $21.7 million, and a net loss of $0.6 million; compared with revenues and net income from continuing operations of $20.8 million and $1.1 million, respectively for the quarter ended March 31, 2014.

In recent years, we have embarked on a strategic transformation as advances in technology have changed the way our customers interact in their professional and personal lives and the way that businesses operate. To meet the changing needs of our customers and to address the changing technological landscape, we are focusing efforts on higher margin and growing areas of business.

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

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

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

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

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

While our overall business has grown and we believe that our pipeline of future sales opportunities is solid, general economic uncertainty remains and may reduce our future growth. We have maintained tightened credit policies in response to the economic climate, in particular to our hardware-only sales.

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Results of Operations

Three Months Ended March 31, 2015 and 2014

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

	Three Months Ended March 31,										Change from 2015 to 2014
	2015					2014
Net revenues:
Subscription and support revenues	$	16,529		76.2	%	$	13,886		66.8	%	$	2,643		19.0	%
Embedded devices and hardware		5,149		23.8	%		6,887		33.2	%		(1,738	)	-25.2	%
Total net revenues		21,678		100.0	%		20,773		100.0	%		905		4.4	%
Cost of revenue, exclusive of a portion of depreciation and amortization shown below:
Subscription and support revenues		6,719		31.0	%		5,359		25.8	%		1,360		25.4	%
Embedded devices and hardware		4,853		22.4	%		5,574		26.8	%		(721	)	-12.9	%
Gross profit		10,106		46.6	%		9,840		47.4	%		266		2.7	%
Operating expenses:
Sales and marketing		3,064		14.1	%		2,954		14.2	%		110		3.7	%
General and administrative		3,929		18.1	%		3,598		17.3	%		331		9.2	%
Engineering and development		2,293		10.6	%		1,278		6.2	%		1,015		79.4	%
Depreciation and amortization		1,654		7.6	%		1,348		6.5	%		306		22.7	%
Operating (loss) income		(834	)	-3.8	%		662		3.2	%		(1,496	)	-226.0	%
Interest expense		210		1.0	%		54		0.3	%		156		288.9	%
Other income		(38	)	-0.2	%		(1,133	)	-5.5	%		1,095		-96.6	%
(Loss) income from continuing operations before income taxes		(1,006	)	-4.6	%		1,741		8.4	%		(2,747	)	-157.8	%
Income tax (benefit) expense		(386	)	-1.8	%		595		2.9	%		(981	)	-164.9	%
(Loss) income from continuing operations, net of income taxes		(620	)	-2.9	%		1,146		5.5	%		(1,766	)	-154.1	%
(Loss) income from discontinued operations, net of income taxes		-		0.0	%		(56	)	-0.3	%		56		-100.0	%
Net (loss) income	$	(620	)	-2.9	%	$	1,090		5.2	%	$	(1,710	)	-156.9	%
Adjusted EBITDA (1)	$	2,284		10.5	%	$	2,775		13.4	%	$	(491	)	-17.7	%

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

Total revenue increased $0.9 million, or 4.4%, for the three months ended March 31, 2015 to $21.7 million from $20.8 million for the same period in 2014. The increase is primarily attributable to the growth in subscriptions and related subscription and support revenues which grew $2.6 million, or 19.0%, to $16.5 million from $13.9 million in 2014. These increases in subscriptions and support revenues were driven partially by the introduction of new product lines, including those recently acquired.
 

Embedded device and hardware revenue declined $1.7 million, or 25.2%, to $5.1 million for the three months ended March 31, 2015 compared to $6.9 million recorded in the same period in 2014. The comparative decrease in embedded devices and hardware revenue was attributable to lower orders from a few hardware-only customers.

Total cost of revenue for the three months ended March 31, 2015 increased $0.6 million, or 5.8%, to $11.6 million compared to $10.9 million for the same period in 2014. Comprising that increase, the cost of revenue for subscription and support services increased $1.4 million, or 25.4%, to $6.7 million for the three months ended March 31, 2015 compared to $5.4 million for the same period in 2014. Cost of revenue for embedded devices and hardware decreased $0.7 million, or 12.9% to $4.9 million for the three months ended March 31, 2015 compared to $5.6 million for the same period in 2014.

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Total gross profit for the period ended March 31, 2015 increased $0.3 million, or 2.7% to $10.1 million compared to $9.8 million for the same period in 2014.

Sales and marketing expense remained consistent quarter over quarter. The expense remained consistent due to full integration of the sales and marketing teams that were being expanded throughout the previous year.

General and administrative expense increased $0.3 million, or 9.2%, to $3.9 million for the three months ended March 31, 2015, compared to $3.6 million for the same period in 2014. The increase is driven primarily by an increase in stock-based compensation.

Engineering and development expenses increased 79.4% to $2.3 million for the three-month period ended March 31, 2015, compared to $1.3 million for the three-month period ended March 31, 2014. The increase was primarily driven by the continued development associated with newly introduced product lines and continued development associated with certain large industrial IoT projects.

Depreciation and amortization expense increased $0.3 million, or 22.7%, to $1.7 million for the three months ended March 31, 2015, compared to $1.3 million for the same period in 2014. The increase in depreciation and amortization is related to recently acquired product lines and development of new product and project initatives, including the amortization of new intangible assets.

Other income includes $1.1 million for the three months ended March 31, 2014 for a pre-tax gain on the sale of a cost method investment in a privately-held business. The carrying value of the investment was $0.2 million and was sold for $1.3 million.
 

We recorded tax benefit of $0.4 million for the three months ended March 31, 2015, compared to a tax expense of $0.6 million for the same period in 2014.

Segment Information

We have one reportable segment, providing interactive and on-demand Machine to Machine (M2M) enterprise solutions enabling the Internet of Things (IOT).

Non-GAAP Financial Measures

Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) and Adjusted EBITDA, which are presented below, are non-GAAP measures and do not purport to be alternatives to operating income as a measure of operating performance. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share are useful to and used by investors and other users of the financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across periods.
 

We believe that
 

● EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, income taxes, depreciation and amortization, which can vary substantially from company-to-company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and

● Investors commonly adjust EBITDA information to eliminate the effect of equity-based compensation and other unusual or infrequently occurring items which vary widely from company-to-company and impair comparability.

We use EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share:

● as a measure of operating performance to assist in comparing performance from period-to-period on a consistent basis

● as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and

● in communications with the board of directors, analysts and investors concerning our financial performance.

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Although we believe, for the foregoing reasons, that the presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations, the non-GAAP financial measures should only be considered in addition to, and not as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP.
 

Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement GAAP financial measures. The non-GAAP financial measures may not be the same non-GAAP measures, and may not be calculated in the same manner, as those used by other companies.
 

Adjusted EBITDA is calculated by excluding the effect of equity-based compensation and non-operational items from the calculation of EBITDA. Management believes that this measure provides additional relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.
 

We believe that excluding depreciation and amortization of property, equipment and intangible assets to calculate EBITDA and Adjusted EBITDA provides supplemental information and an alternative presentation that is useful to investors’ understanding of our core operating results and trends. Not only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present or future replacement costs, but also they are based on our estimates of remaining useful lives.
 

We believe that excluding the effects of equity-based compensation from non-GAAP financial measures provides supplemental information and an alternative presentation useful to investors’ understanding of our core operating results and trends. Investors have indicated that they consider financial measures of our results of operations excluding equity-based compensation as important supplemental information useful to their understanding of our historical results and estimating our future results.
 

We also believe that, in excluding the effects of equity-based compensation, our non-GAAP financial measures provide investors with transparency into what management uses to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods and to compare our results of operations on a more consistent basis against that of other companies, in making financial and operating decisions and to establish certain management compensation.
 

Equity-based compensation is an important part of total compensation, especially from the perspective of employees. We believe, however, that supplementing GAAP income from continuing operations by providing income from continuing operations, excluding the effect of equity-based compensation in all periods, is useful to investors because it enables additional and more meaningful period-to-period comparisons.  

Adjusted EBITDA excludes infrequent or unusual items including costs and fees related to an internal ERP systems integration upgrade, a network systems evaluation and acquisition related costs. We believe that these costs are unusual costs that we do not expect to recur on a regular basis, and consequently, we do not consider these charges as a component of ongoing operations.
 

EBITDA and Adjusted EBITDA are not measures of liquidity calculated in accordance with GAAP, and should be viewed as a supplement to – not a substitute for – results of operations presented on the basis of GAAP. EBITDA and Adjusted EBITDA do not purport to represent cash flow provided by operating activities as defined by GAAP. Furthermore, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly-titled measures reported by other companies.

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The following table reconciles the specific items excluded from GAAP in the calculation of EBITDA and Adjusted EBITDA for the periods indicated below (in thousands except per share amounts):

	For The Three Months Ended March 31,
	2015			2014
(Loss) income from continuing operations, net of income taxes (GAAP)	$	(620	)	$	1,146
Depreciation and amortization		1,881			1,419
Interest expense and other non-operating expense (income), net		172			(1,079	)
Income tax (benefit) expense		(386	)		595
EBITDA (non-GAAP)		1,047			2,081
Equity-based compensation		784			555
Infrequent or unusual items, including transaction and other costs		453			139
Adjusted EBITDA (non-GAAP)	$	2,284		$	2,775
(Loss) income from continuing operations, net of income taxes, per diluted share (GAAP)	$	(0.03	)	$	0.06
EBITDA per diluted share (non-GAAP)		0.06			0.11
Adjusted EBITDA per diluted share (non-GAAP)		0.12			0.14
Weighted average shares outstanding used in computing diluted per share amounts:
		18,993			19,350

As noted above infrequent or unusual items include costs and fees related to an internal ERP systems integration upgrade, a network systems evaluation and acquisition related costs.

Liquidity and Capital Resources

We use the net cash generated from our operations to fund new product development, upgrades to our technology and to invest in new businesses. Our sources of funds, principally from operations and, to the extent necessary, from external financing arrangements, are sufficient to meet ongoing operations and investing requirements.

We had working capital of $23.0 million as of March 31, 2015, compared to $23.7 million as of December 31, 2014. We had cash balances of $14.7 million and $17.3 million as of March 31, 2015 and December 31, 2014; and available credit of $5.0 million as of March 31, 2015 and December 31, 2014. Our allowance for doubtful accounts reflected in the accompaying balance sheet includes bad debt reserves and revenue reserves.

Net cash provided by operating activities for the three-month period ended March 31, 2015 was $0.3 million which was consistent with net cash of $0.3 million provided by operating activities of continuing operations for the three-month period ended March 31, 2014.
 

Net cash used in investing activities for the three-month period ended March 31, 2015 was $1.7 million, representing expenditures for tangible assets, purchases of software and capitalization of internally developed software.
 

Net cash used in financing activities for the three-month period ended March 31, 2015 was $1.2 million, primarily for payments on debt and capital leases.
 

On May 5, 2014, we entered into a Second Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”). The Loan Agreement was entered into by the Company in contemplation of the cash funding required in connection with our acquisition of Omnilink (see Note B – Merger and Acquisition) and to provide additional funding as needed for future capital investments for the business. In that regard, the Loan Agreement provides for $30.0 million of aggregate credit which is comprised of a $25.0 million term loan that was specifically structured and designated as funds to be borrowed and used by the Company toward payment of cash purchase consideration for the Omnilink transaction and an additional $5.0 million revolving line of credit for general corporate needs.

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The maturities for both the term and revolving credit facilities contemplated in the Loan Agreement are May 5, 2019. As is typical in the case of term loan structures, the Loan Agreement provides for mandatory scheduled quarterly payments of principal as set forth in the table below that will cumulatively have the effect of repaying 80%, or $20.0 million, of the principal borrowed before the maturity date in May, 2019. The remaining principal of $5.0 million will be due at maturity if not otherwise repaid earlier by way of voluntary Permitted Prepayments or by mandatory Excess Cash Flow Recapture Payments (as defined in the Loan Agreement).

Loan Agreement Principal Repayment Schedule
	Quarterly		Annually
June 2014 - March 2015	$	625,000	$	2,500,000
June 2015 - March 2016		937,500		3,750,000
June 2016 - March 2017		937,500		3,750,000
June 2017 - March 2018		1,250,000		5,000,000
June 2018 - March 2019		1,250,000		5,000,000
Outstanding balance due May 2019		-		5,000,000

Our obligations under the Loan Agreement are secured by substantially all of our assets and the assets of our subsidiaries. In addition, we are required to meet certain financial and other restrictive covenants customary with this type of facility, including maintaining a senior leverage ratio, a fixed charge coverage ratio and minimum liquidity availability. We are also prohibited from paying dividends. The Loan Agreement contains customary events of default. If a default occurs and is not cured within any applicable cure period or is not waived, any outstanding obligations under the Loan Agreement may be accelerated. We were in compliance with all of the Bank’s financial covenants at March 31, 2015.

Off-Balance Sheet Arrangements

As of March 31, 2015, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

There have been no material changes in our critical accounting policies, estimates and judgments during the three months ended March 31, 2015 compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2014.

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Item 3. Quantitative and Qualitative Disclosures about Market Risks.

The market risk in our financial instruments represents the potential loss arising from adverse changes in financial rates. We are exposed to market risk in the area of interest rates. These exposures are directly related to our normal funding and investing activities. We are subject to interest rate market risk in connection with our long-term debt. Our principal interest rate exposure relates to outstanding amounts under our $25.0 million term loan. Our term loan provides for variable interest rates determined by reference to the prime rate or LIBOR rate. A one-eighth percent increase or decrease in assumed interest rates for the $25.0 million term loan for the one year period following its inception would result in a corresponding increase or decrease in interest expense of $30,000.

We also hold cash balances in accounts with commercial banks in the United States and foreign countries. These cash balances represent operating balances only and are invested in short-term time deposits of the local bank. Such operating cash balances held at banks outside the United States are denominated in the local currency and are minor.

Foreign Currency

The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates, and revenues and expenses are translated at the ending exchange rate from the prior period which materially approximates the average exchange rates for each period. Resulting translation adjustments are reflected as other comprehensive (loss) income within shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Except for transactions with customers and vendors in Canada, substantially all other transactions are denominated in U.S. dollars. Foreign operations were not significant to us for the quarter ended March 31, 2015.

Item 4. Controls and Procedures.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in the Securities Exchange Act Rules 13a – 15(f). Our internal control system is designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance as to the reliability of financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework, issued in 2013. Based on this assessment, management concludes that, as of March 31, 2015, our internal control over financial reporting is effective based on those criteria.

Management has excluded Omnilink Systems, Inc. (Omnilink) from its assessment of internal control over financial reporting as of March 31, 2015 because we merged our wholly-owned subsidiary with and into Omnilink with Omnilink surviving the merger as a wholly-owned subsidiary of the Company in a purchase business combination during 2014. Omnilink’s internal controls over financial reporting will be assessed throughout the year as part of our controls over financial reporting and reported on for the year ended December 31, 2015.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We currently are not involved in any pending material litigation.

Item 1A. Risk Factors.

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussion set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as previously filed with the SEC, and the information under “Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None - not applicable

Item 3. Defaults Upon Senior Securities.

None - not applicable.

Item 4. Mine Safety Disclosures.

None - not applicable.

Item 5. Other Information.

None - not applicable.

Item 6. Exhibits

Exhibit 31.1 Certification of Chairman and Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a).

Exhibit 31.2 Certification of Chief Financial Officer, Executive Vice President, and Principal Financial and Accounting Officer Pursuant to Exchange Act Rule 13a-14(a).

Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101 The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, (ii) Unaudited Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2015 and 2014, (iii) Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014, (iv) Unaudited Condensed Consolidated Statement of Shareholders Equity for the three months ended March 31, 2015 and (v) Unaudited Condensed Notes to Consolidated Financial Statements.

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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.

	NUMEREX CORP.
	(Registrant)
May 11, 2015	/s/ Stratton J. Nicolaides
	Stratton J. Nicolaides
	Chairman of the Board of Directors and Chief Executive Officer
May 11, 2015	/s/ Richard A. Flynt
	Richard A. Flynt
	Chief Financial Officer and
	Principal Financial and Accounting Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER

I, Stratton J. Nicolaides, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Numerex Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2015

/s/ Stratton J. Nicolaides

Stratton J. Nicolaides

Chairman of the Board of Directors

and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Richard A. Flynt, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Numerex Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2015

/s/ Richard A. Flynt

Richard A. Flynt

Chief Financial Officer and

Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Numerex Corp. (the “Company”) on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stratton J. Nicolaides, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)           The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Executive Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.

May 11, 2015	/s/ Stratton J. Nicolaides
	Stratton J. Nicolaides
	Chairman of the Board of Directors and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Numerex Corp (the “Company”) on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Flynt, as Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)           The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Financial Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.

May 11, 2015	/s/ Richard A. Flynt
	Richard A. Flynt
	Chief Financial Officer and Principal Financial and Accounting Officer

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INTANGIBLE ASSETS (Detail Textuals) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Intangible Assets [Abstract]
Amortization of intangible assets	$ 1.2	$ 1.0
Amortization of intangible assets is recorded in cost of subscription revenue	0.2	0.1
Internally generated software development costs	$ 0.4	$ 0.5

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INVENTORY

3 Months Ended

Mar. 31, 2015

Inventory [Abstract]

INVENTORY

NOTE C - INVENTORY

Inventory consisted of the following (in thousands):

	March 31, 2015			December 31, 2014
Raw materials	$	1,663		$	2,228
Finished goods		7,959			7,579
Reserve for obsolescence		(1,531	)		(1,397	)
	$	8,091		$	8,410

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DEBT (Detail Textuals) (Silicon Valley Bank, USD $) In Millions, unless otherwise specified	0 Months Ended
	May 05, 2014	Mar. 31, 2015
Term loan
Debt Instrument [Line Items]
Available credit amount	$ 25.0
Outstanding principal balance		5.0
Interest rate applicable to amounts drawn	2.75%
Revolving line of credit
Debt Instrument [Line Items]
Available credit amount	5.0
Amount available under the revolving line of credit		$ 0.5

XML

DEBT - Summary of debt (Parentheticals) (Details)	Mar. 31, 2015
Debt Disclosure [Abstract]
Interest rate of seller financed note payable	4.25%

XML

DEBT (Detail Textuals 1) (USD $) In Millions, unless otherwise specified	1 Months Ended
	Oct. 31, 2012	Mar. 31, 2015
Promissory Note
Debt Instrument [Line Items]
Promissory note payable		0.3
Small technology company
Debt Instrument [Line Items]
Promissory note payable	$ 1.9
Interest rate spread over prime rate	1.00%
Interest rate minimum percentage	4.25%
Interest rate at end of period		4.25%

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NET (LOSS) EARNINGS PER SHARE - Basic and diluted weighted average shares outstanding for earnings per share calculations (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net Earnings Per Share [Abstract]
(Loss) income from continuing operations (in dollars)	$ (620)	$ 1,146
Weighted average shares outstanding:
Basic	18,993,000	18,853,000
Dilutive effect of common stock equivalents		497,000
Total	18,993,000	19,350,000
Anti-dilutive equity-based compensation awards	727,000	510,000

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MERGER

3 Months Ended

Mar. 31, 2015

Acquisition [Abstract]

MERGER

NOTE B – MERGER

On May 5, 2014, in accordance with the terms and conditions of the merger agreement, we merged our wholly-owned subsidiary with and into Omnilink Systems Inc. (Omnilink) with Omnilink surviving the merger as a wholly-owned subsidiary of Numerex. The purchase price of $37.5 million was composed of a cash payment of $37.3 million and a working capital adjustment of $0.2 million, subject to post-closing purchase price adjustments and escrows as provided in the merger agreement.

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

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the closing date of the Omnilink merger (dollars in thousands):

	Fair Value			Estimated Useful Lives
Cash	$	195		n/a
Accounts receivable		2,677		n/a
Inventory		873		n/a
Prepaid and other assets		377		n/a
Property and equipment		1,613		4	(a)
Deferred tax asset		2,400		n/a
Customer relationships		6,056		11
Technology		4,998		14
Trade names		3,632		Indefinite
Goodwill		17,518		Indefinite
Total identifiable assets acquired		40,339
Accounts payable		(1,756	)	n/a
Accrued expenses		(1,037	)	n/a
Deferred revenue		(64	)	n/a
Total liabilities assumed		(2,857	)
Net assets acquired	$	37,482

(a) The weighted average remaining useful life for all property and equipment is approximately four years.

The above fair value purchase price allocations are provisional and subject to change. The total purchase consideration for the merger was allocated to identifiable assets purchased and liabilities assumed based on fair value. The estimated fair value attributed to intangible assets, other than Goodwill, was based on common valuation techniques. The final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible, but no later than one year from the acquisition date. Given the scope of the operational integration and valuation efforts, as well as the complexity presented in the valuation of the tax effects related to tax attributes and other deferred tax items, the valuation of certain assets and liabilities is still being completed. The primary area that is not yet finalized relates to the calculation of deferred taxes and the corresponding effect on the residual value of goodwill. We have recorded estimated net deferred tax assets, pending finalization of Omnilink’s pre-acquisition income tax returns.

The gross amount of accounts receivable in the table above is $2.9 million. Based on the nature and financial strength of the customers, we expect to collect amounts due for the accounts receivable of $2.7 million. Our best estimate at the merger date of the contractual cash flows not expected to be collected is $0.2 million.

The residual allocation to goodwill results from such factors as an assembled workforce, expected significant synergies for market growth and profitability as well as Omnilink’s service and product lines contributing to our becoming the market leader in select M2M vertical markets. The total amount of goodwill will not be deductible for income tax purposes.

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$ 14,705	$ 17,270
Accounts receivable, less allowance for doubtful accounts of $1,786 and $1,106	13,231	12,287
Financing receivables, current	1,666	1,595
Inventory, net of reserve for obsolescence	8,091	8,410
Prepaid expenses and other current assets	2,436	2,329
Deferred tax assets, current	3,161	3,161
TOTAL CURRENT ASSETS	43,290	45,052
Financing receivables, less current portion	2,924	2,984
Property and equipment, net of accumulated depreciation and amortization of $4,385 and $3,815	4,861	4,889
Software, net of accumulated amortization	6,024	6,106
Other intangible assets, net of accumulated amortization	19,124	19,163
Goodwill	44,548	44,548
Deferred tax assets, less current portion	5,967	5,616
Other assets	2,714	2,585
TOTAL ASSETS	129,452	130,943
CURRENT LIABILITIES
Accounts payable	11,589	12,257
Accrued expenses and other current liabilities	2,686	2,471
Deferred revenues	1,889	2,258
Current portion of long-term debt	4,067	4,251
Obligations under capital lease	57	148
TOTAL CURRENT LIABILITIES	20,288	21,385
Long-term debt, less current portion	18,412	19,350
Other liabilities	1,751	1,346
TOTAL LIABILITIES	40,451	42,081
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value; authorized 3,000; none issued
Common stock value
Additional paid-in capital	99,840	99,056
Treasury stock, at cost, 1,292 shares	(5,352)	(5,352)
Accumulated other comprehensive loss	(73)	(48)
Accumulated deficit	(5,414)	(4,794)
TOTAL SHAREHOLDERS' EQUITY	89,001	88,862
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	129,452	130,943
Class A Common Stock
SHAREHOLDERS' EQUITY
Common stock value
Class B Common Stock
SHAREHOLDERS' EQUITY
Common stock value

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net (loss) income	$ (620)	$ 1,090
Less (loss) income from discontinued operations, net of income taxes		(56)
(Loss) income from continuing operations, net of income taxes	(620)	1,146
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	1,881	1,419
Equity-based compensation expense	784	555
Deferred income taxes	(351)	448
Bad debt expense	140	183
Inventory reserves	134	130
Gain on sale of cost method investment		(1,109)
Other non-cash expense	21	9
Changes in assets and liabilities, net of effects of acquisitions:
Accounts and financing receivables	(1,094)	(1,605)
Inventory, net	185	(442)
Accounts payable	(657)	(446)
Deferred revenue	51	56
Other	(154)	(43)
Net cash provided by operating activities	320	301
Cash flows from investing activities:
Purchases of property and equipment	(554)	(847)
Capitalized software development and purchases of software	(1,119)	(910)
Proceeds from sale of cost basis investment		1,308
Net cash used in investing activities	(1,673)	(449)
Cash flows from financing activities:
Principal payments on debt	(1,121)	(105)
Principal payments on capital lease obligations	(90)	(69)
Equity-based compensation plan activity	1	182
Payment of employee taxes on equity-based awards	(2)	(106)
Net cash used in financing activities	(1,212)	(98)
Cash flows from discontinued operations:
Cash provided by operating activities		29
Net cash provided by discontinued operations		29
Net decrease in cash and cash equivalents	(2,565)	(217)
Cash and cash equivalents at beginning of period	17,270	25,603
Cash and cash equivalents at end of period	14,705	25,386
Supplemental disclosures of cash flow information:
Cash paid for interest	191	54
Cash paid for income taxes	28	29
Disclosure of non-cash investing and financing activities:
Non cash interest	19
Capital expenditures in accounts payable	$ 407	$ 115

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MERGER (Detail Textuals 1) (Omnilink Systems, Inc., USD $)	May 05, 2014
Omnilink Systems, Inc.
Business Acquisition [Line Items]
Accounts receivable gross	$ 2,900,000
Accounts receivable net	2,677,000
Accounts receivable allowances	$ 200,000

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INTANGIBLE ASSETS - Summary of intangible assets other than goodwill (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 47,936	$ 46,817
Accumulated Amortization	(22,788)	(21,548)
Net Book Value	25,148	25,269
Purchased and developed software
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Weighted Remaining Average Useful Lives	1 year 4 months 24 days
Gross Carrying Amount	11,887	11,176
Accumulated Amortization	(7,134)	(6,409)
Net Book Value	4,753	4,767
Software in development
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,271	1,339
Accumulated Amortization
Net Book Value	1,271	1,339
Total software
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross Carrying Amount	13,158	12,515
Accumulated Amortization	(7,134)	(6,409)
Net Book Value	6,024	6,106
Licenses
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Weighted Remaining Average Useful Lives	4 months 24 days
Gross Carrying Amount	12,763	12,763
Accumulated Amortization	(11,955)	(11,886)
Net Book Value	808	877
Customer relationships
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Weighted Remaining Average Useful Lives	8 years 3 months 18 days
Gross Carrying Amount	8,287	8,287
Accumulated Amortization	(1,594)	(1,359)
Net Book Value	6,693	6,928
Technologies
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Weighted Remaining Average Useful Lives	13 years 1 month 6 days
Gross Carrying Amount	4,998	4,998
Accumulated Amortization	(327)	(237)
Net Book Value	4,671	4,761
Patents and trademarks
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Weighted Remaining Average Useful Lives	3 years 10 months 24 days
Gross Carrying Amount	4,220	3,343
Accumulated Amortization	(1,778)	(1,657)
Net Book Value	2,442	1,686
Trade names
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Weighted Remaining Average Useful Lives	Indefinite
Gross Carrying Amount	3,632	3,632
Net Book Value	3,632	3,632
Other
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross Carrying Amount	878	1,279
Accumulated Amortization
Net Book Value	878	1,279
Total Other Intangibles
Finite Lived And Indefinite Lived Intangible Assets [Line Items]
Gross Carrying Amount	34,778	34,302
Accumulated Amortization	(15,654)	(15,139)
Net Book Value	$ 19,124	$ 19,163

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NATURE OF OPERATIONS AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2015

Nature Of Operations And Basis Of Presentation [Abstract]

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NOTE A – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Numerex Corp. (NASDAQ: NMRX) is a leading provider of interactive and on-demand machine-to-machine (M2M) enterprise solutions enabling the Internet of Things (IoT). The Company provides its technology and services through its integrated M2M horizontal platforms, which are generally sold on a subscription basis. The Company offers Numerex DNA® that may include hardware and smart Devices, cellular and satellite Network services, and software Applications that are delivered through our M2M platform. The Company also provides business services to enable the development of efficient, reliable, and secure solutions while accelerating deployment. Numerex is ISO 27001 information security-certified, highlighting the Company’s focus on M2M data security, service reliability and around-the-clock support of its customers’ M2M solutions.

We prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, referred to as GAAP, for interim financial information and the Rules and Regulations issued by the Securities Exchange Commission, or SEC, as applicable. These financial statements include all of our accounts and those of our wholly-owned subsidiaries. We have eliminated intercompany transactions and balances in consolidation.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of management, the accompanying financial statements reflect all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, considered necessary for a fair presentation of our financial position as of March 31, 2015 and our operating results and cash flows for the interim periods presented. The accompanying condensed consolidated balance sheet as of December 31, 2014 was derived from our audited financial statements, but does not include all disclosures required by GAAP. The financial information presented herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 which includes information and disclosures not included in this quarterly report.

The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ materially from these estimates. Operating results for the three months ended March 31, 2015, may not be indicative of the results that may be expected for the year ending December 31, 2015 or any future periods.

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 1,786	$ 1,106
Accumulated depreciation and amortization	$ 4,385	$ 3,815
Preferred stock, no par value (in dollars per share)
Preferred stock, shares authorized	3,000	3,000
Preferred stock, shares issued
Treasury stock, at cost, shares	1,292	1,292
Class A Common Stock
Common stock, no par value (in dollars per share)
Common stock, shares authorized	30,000	30,000
Common stock, shares issued	20,285	20,284
Common stock, shares outstanding	18,993	18,992
Class B Common Stock
Common stock, no par value (in dollars per share)
Common stock, shares authorized	5,000	5,000
Common stock, shares issued

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INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2015

Intangible Assets [Abstract]

Schedule of intangible assets other than goodwill

	As of March 31, 2015									As of December 31, 2014
	Remaining Useful Lives		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased and developed software		1.4	$	11,887	$	(7,134	)	$	4,753	$	11,176	$	(6,409	)	$	4,767
Software in development		n/a		1,271		-			1,271		1,339		-			1,339
Total software				13,158		(7,134	)		6,024		12,515		(6,409	)		6,106
Licenses		0.4		12,763		(11,955	)		808		12,763		(11,886	)		877
Customer relationships		8.3		8,287		(1,594	)		6,693		8,287		(1,359	)		6,928
Technologies		13.1		4,998		(327	)		4,671		4,998		(237	)		4,761
Patents and trademarks		3.9		4,220		(1,778	)		2,442		3,343		(1,657	)		1,686
Trade names		Indefinite		3,632		-			3,632		3,632		-			3,632
Other		n/a		878		-			878		1,279		-			1,279
Total other intangible assets				34,778		(15,654	)		19,124		34,302		(15,139	)		19,163
			$	47,936	$	(22,788	)	$	25,148	$	46,817	$	(21,548	)	$	25,269

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Document And Entity Information	3 Months Ended
	Mar. 31, 2015	May 08, 2015
Document And Entity Information [Abstract]
Entity Registrant Name	NUMEREX CORP /PA/
Entity Central Index Key	0000870753
Trading Symbol	nmrx
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		18,984,563
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

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DEBT (Tables)

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Schedule of debt

	March 31, 2015		December 31, 2014
Note payable to Silicon Valley Bank, with interest at our option of prime rate or LIBOR rate plus margin	$	22,162	$	23,125
Seller financed note payable, with interest at 4.25%, monthly payments of principal and interest, secured by equipment, due September 2015		317		476
		22,479		23,601
Less current portion of long-term debt		4,067		4,251
Noncurrent portion of long-term debt	$	18,412	$	19,350

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net revenues:
Subscription and support revenues	$ 16,529	$ 13,886
Embedded devices and hardware	5,149	6,887
Total net revenues	21,678	20,773
Cost of sales, exclusive of a portion of depreciation and amortization shown below:
Subscription and support revenues	6,719	5,359
Embedded devices and hardware	4,853	5,574
Gross profit	10,106	9,840
Operating expenses:
Sales and marketing	3,064	2,954
General and administrative	3,929	3,598
Engineering and development	2,293	1,278
Depreciation and amortization	1,654	1,348
Operating (loss) income	(834)	662
Interest expense	210	54
Other income, net	(38)	(1,133)
(Loss) income from continuing operations before income taxes	(1,006)	1,741
Income tax (benefit) expense	(386)	595
(Loss) income from continuing operations, net of income taxes	(620)	1,146
(Loss) from discontinued operations, net of income taxes		(56)
Net (loss) income	(620)	1,090
Other items of comprehensive income, net of income taxes:
Foreign currency translation adjustment	(25)	(4)
Comprehensive (loss) income	$ (645)	$ 1,086
Basic earnings per share:
(Loss) income from continuing operations (in dollars per share)	$ (0.03)	$ 0.06
(Loss) income from discontinued operations (in dollars per share)	$ 0.00	$ 0.00
Net (loss) income (in dollars per share)	$ (0.03)	$ 0.06
Diluted earnings per share:
(Loss) income from continuing operations (in dollars per share)	$ (0.03)	$ 0.06
(Loss) income from discontinued operations (in dollars per share)	$ 0.00	$ 0.00
Net (loss) income (in dollars per share)	$ (0.03)	$ 0.06
Weighted average shares outstanding used in computing earnings per share:
Basic (in shares)	18,993	18,853
Diluted (in shares)	18,993	19,350

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DEBT

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

DEBT

NOTE F – DEBT

Debt consisted of the following (dollars in thousands):

	March 31, 2015		December 31, 2014
Note payable to Silicon Valley Bank, with interest at our option of prime rate or LIBOR rate plus margin	$	22,162	$	23,125
Seller financed note payable, with interest at 4.25%, monthly payments of principal and interest, secured by equipment, due September 2015		317		476
		22,479		23,601
Less current portion of long-term debt		4,067		4,251
Noncurrent portion of long-term debt	$	18,412	$	19,350

On May 5, 2014, we entered into a Second Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank in order to, among other things, establish a term loan of $25.0 million and a revolving line of credit of up to $5.0 million (collectively, the “Credit Facility”). As of March 31, 2015, there was $5.0 million available under the revolving line of credit. The proceeds from the term loan were used to finance the Omnilink merger. See Note B –– Merger.

The maturity date of the loan is May 5, 2019 with regular required quarterly principal payments which began June 30, 2014. The scheduled outstanding principal balance of $5.0 million will be due at maturity if not otherwise repaid earlier by way of voluntary Permitted Prepayments or by mandatory Excess Cash Flow Recapture Payments (as defined in the Loan Agreement).

The interest rate applicable to amounts drawn pursuant to the Loan Agreement is currently 2.75% and is, at our option, determined by reference to the prime rate or LIBOR rate plus a margin established in the Loan Agreement.

Our obligations under the Credit Facility are secured by substantially all of our assets and the assets of our subsidiaries. In addition, we are required to meet certain financial and other restrictive covenants customary with this type of facility, including maintaining a senior leverage ratio, a fixed charge coverage ratio and minimum liquidity availability. We are also prohibited from entering into any debt agreements senior to the Credit Facility and paying dividends. The Amended Loan Agreement contains customary events of default. If a default occurs and is not cured within the applicable cure period or is not waived, any outstanding obligations under the Credit Facility may be accelerated. We were in compliance with all of the Bank’s financial covenants at March 31, 2015.

In connection with our acquisition of a small technology business in October 2012, we entered into a Promissory Note of $1.9 million payable to the sellers of the business. This Promissory Note is subordinate to the Credit Facility, bears interest at the greater of prime plus 1% or 4.25% (4.25% as of March 31, 2015) and is payable in monthly installments through September 2015. As of March 31, 2015, the balance outstanding on the Promissory Note was $0.3 million, all classified as current.

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INCOME TAXES

3 Months Ended

Mar. 31, 2015

Income Taxes [Abstract]

INCOME TAXES

NOTE E – INCOME TAXES

We calculate our interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, we make our best estimate of the annual expected effective tax rate and apply that rate to our ordinary year-to-date income or loss.  In addition, we calculate a year-to-date adjustment to increase or decrease our income tax provision to take into account our current expected effective tax rate.  The tax or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

For the three months ended March 31, 2015, we recorded income tax benefit from continuing operations of $0.4 million, as compared to an income tax expense of $0.6 million for the three months ended March 31, 2014.  Our effective tax rates for the three months ended March 31, 2015 and 2014 were 38.4% and 34.2% respectively. The effective tax rate for the three months ended March 31, 2015 and 2014 differed from the federal statutory rate applied to income and losses before income taxes primarily as a result of the effect of expenses that are not deductible for income tax purposes and state income taxes, including the tax effect of changes in effective state income tax rates, partially offset by an income tax benefit on disqualifying dispositions of incentive stock options.

 
We continue to maintain a valuation allowance for deferred tax assets related to certain state and foreign net operating losses, and federal loss carryforwards for which we have determined it is more likely than not expiration will occur before utilization. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2011 through 2014 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from years in which net operating losses have arisen are still open for examination by the tax authorities.

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INVENTORY - Summary of inventory (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Inventory [Abstract]
Raw materials	$ 1,663	$ 2,228
Finished goods	7,959	7,579
Reserve for obsolescence	(1,531)	(1,397)
Inventory, net	$ 8,091	$ 8,410

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NET (LOSS) EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2015

Net Earnings Per Share [Abstract]

Schedule of basic and diluted weighted average shares outstanding for earnings per share calculations

	For the Three Months Ended March 31,
	2015			2014
(Loss) income from continuing operations	$	(620	)	$	1,146
Weighted average shares outstanding:
Basic		18,993			18,853
Dilutive effect of common stock equivalents		-			497
Total		18,993			19,350
Anti-dilutive equity-based compensation awards		727			510

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MERGER (Tables)

3 Months Ended

Mar. 31, 2015

Acquisition [Abstract]

Schedule of allocation of the purchase price and summary of estimated useful lives

	Fair Value			Estimated Useful Lives
Cash	$	195		n/a
Accounts receivable		2,677		n/a
Inventory		873		n/a
Prepaid and other assets		377		n/a
Property and equipment		1,613		4	(a)
Deferred tax asset		2,400		n/a
Customer relationships		6,056		11
Technology		4,998		14
Trade names		3,632		Indefinite
Goodwill		17,518		Indefinite
Total identifiable assets acquired		40,339
Accounts payable		(1,756	)	n/a
Accrued expenses		(1,037	)	n/a
Deferred revenue		(64	)	n/a
Total liabilities assumed		(2,857	)
Net assets acquired	$	37,482

(a) The weighted average remaining useful life for all property and equipment is approximately four years.

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NET (LOSS) EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2015

Net Earnings Per Share [Abstract]

NET (LOSS) EARNINGS PER SHARE

NOTE G – NET (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is computed by dividing net (loss) income available to common shareholders by the weighted average number of common shares outstanding during the period excluding the dilutive impact of common stock equivalents. Diluted earnings per share include the effect of all potentially dilutive securities on earnings per share. The dilutive effect of outstanding equity-based compensation awards is computed using the treasury stock method. The computation of diluted earnings per share does not assume exercise of securities that would have an anti-dilutive effect on earnings.

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

	For the Three Months Ended March 31,
	2015			2014
(Loss) income from continuing operations	$	(620	)	$	1,146
Weighted average shares outstanding:
Basic		18,993			18,853
Dilutive effect of common stock equivalents		-			497
Total		18,993			19,350
Anti-dilutive equity-based compensation awards		727			510

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RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2015

Recent Accounting Pronouncements [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE H – RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

In May 2014, the FASB issued new accounting guidance for revenue recognized from contracts with customers. The core principle of the guidance is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance was set to become effective for us for fiscal years, and interim reporting periods within those years, beginning January 1, 2017 and will require retrospective application when adopted. In May 2015, the FASB issued for public comment a proposed Accounting Standards Update (ASU), Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which would defer the effective date of its new revenue recognition standard by one year beginning January 1, 2018. We are currently in the process of evaluating the impact of adoption on our consolidated financial statements.

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INVENTORY (Tables)

3 Months Ended

Mar. 31, 2015

Inventory [Abstract]

Schedule of inventory

	March 31, 2015			December 31, 2014
Raw materials	$	1,663		$	2,228
Finished goods		7,959			7,579
Reserve for obsolescence		(1,531	)		(1,397	)
	$	8,091		$	8,410

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MERGER (Detail Textuals) (Omnilink Systems, Inc., Merger agreement, USD $) In Millions, unless otherwise specified	0 Months Ended
	May 05, 2014
Omnilink Systems, Inc. | Merger agreement
Business Acquisition [Line Items]
Total consideration	$ 37.5
Consideration paid in cash	37.3
Working capital adjustment	$ 0.2

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INCOME TAXES (Detail Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Taxes [Abstract]
Income tax expense (benefit)	$ (386)	$ 595
Effective tax rates	38.40%	34.20%

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Common Shares	Additional Paid-in Capital	Treasury Stock	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Balance at Jan. 01, 2015	$ 20,284	$ 99,056	$ (5,352)	$ (48)	$ (4,794)	$ 88,862
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation expense		783				783
Equity-based compensation plan activity	1
Value of shares retained to pay employee taxes		(2)				(2)
Translation adjustment				(25)		(25)
Other		3				3
Net loss					(620)	(620)
Balance at Mar. 31, 2015	$ 20,285	$ 99,840	$ (5,352)	$ (73)	$ (5,414)	$ 89,001

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INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2015

Intangible Assets [Abstract]

INTANGIBLE ASSETS

NOTE D – INTANGIBLE ASSETS

Intangible Assets Other Than Goodwill

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

	As of March 31, 2015									As of December 31, 2014
	Remaining Useful Lives		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased and developed software		1.4	$	11,887	$	(7,134	)	$	4,753	$	11,176	$	(6,409	)	$	4,767
Software in development		n/a		1,271		-			1,271		1,339		-			1,339
Total software				13,158		(7,134	)		6,024		12,515		(6,409	)		6,106
Licenses		0.4		12,763		(11,955	)		808		12,763		(11,886	)		877
Customer relationships		8.3		8,287		(1,594	)		6,693		8,287		(1,359	)		6,928
Technologies		13.1		4,998		(327	)		4,671		4,998		(237	)		4,761
Patents and trademarks		3.9		4,220		(1,778	)		2,442		3,343		(1,657	)		1,686
Trade names		Indefinite		3,632		-			3,632		3,632		-			3,632
Other		n/a		878		-			878		1,279		-			1,279
Total other intangible assets				34,778		(15,654	)		19,124		34,302		(15,139	)		19,163
			$	47,936	$	(22,788	)	$	25,148	$	46,817	$	(21,548	)	$	25,269

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

Amortization expense related to intangible assets was $1.2 million and $1.0 million for the three months ended March 31, 2015 and 2014, respectively. Amortization expense recorded in cost of subscription revenues in the accompanying condensed consolidated statements of operations and comprehensive (loss) income was $0.2 million and $0.1 million for the three months ended March 31, 2015 and 2014, respectively. Additionally, we have capitalized approximately $0.4 million and $0.5 million, respectively of internally generated software development costs for the three months ended March 31, 2015 and 2014 respectively.

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DEBT - Summary of debt (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term debt, total	$ 22,479	$ 23,601
Less current portion of long-term debt	4,067	4,251
Noncurrent portion of long-term debt	18,412	19,350
Note payable to Silicon Valley Bank, with interest at our option of prime rate or LIBOR rate plus margin
Debt Instrument [Line Items]
Long-term debt, total	22,162	23,125
Seller financed note payable, with interest at 4.25%, monthly payments of principal and interest, secured by equipment, due September 2015
Debt Instrument [Line Items]
Long-term debt, total	$ 317	$ 476

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MERGER - Summary of provisional measurements (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended
	May 05, 2014		Mar. 31, 2015	Dec. 31, 2014
Business Acquisition [Line Items]
Goodwill			$ 44,548	$ 44,548
Omnilink Systems, Inc.
Business Acquisition [Line Items]
Cash	195
Accounts receivable	2,677
Inventory	873
Prepaid and other assets	377
Property and equipment	1,613
Deferred tax asset	2,400
Goodwill	17,518
Total identifiable assets acquired	40,339
Accounts payable	(1,756)
Accrued expenses	(1,037)
Deferred revenue	(64)
Total liabilities assumed	(2,857)
Net assets acquired	37,482
Property and equipment, lives in years	4 years	[1]
Goodwill, lives in years	Indefinite
Omnilink Systems, Inc. | Customer relationships
Business Acquisition [Line Items]
Intangible assets other than goodwill	6,056
Estimated useful lives of acquired finite lived intangible assets	11 years
Omnilink Systems, Inc. | Technology
Business Acquisition [Line Items]
Intangible assets other than goodwill	4,998
Estimated useful lives of acquired finite lived intangible assets	14 years
Omnilink Systems, Inc. | Trade names
Business Acquisition [Line Items]
Intangible assets other than goodwill	$ 3,632
Estimated useful lives of acquired indefinite lived intangible assets	Indefinite

[1] The weighted average remaining useful life for all property and equipment is approximately four years.