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~~	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2017
		For the quarterly period ended September 30, 2017
or
¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the transition period from __________ to __________~~	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~~	11-2948749
(State or other jurisdiction	(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
of incorporation or organization)	Identification No.)

400 Interstate Parkway, Suite 1350 ~~Atlanta, GA 30339-2119 (Address of principal executive offices) (Zip Code)~~

~~(770) 693-5950 (Registrant’s telephone number~~Atlanta, ~~including~~GA ~~area code)~~30339-2119

(Address of principal executive offices) (Zip Code)

(770) 693-5950

(Registrant’s telephone number, including area code)

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

Yes þ No ¨

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

Yes þ No ¨

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

~~As of August 7, 2017, 19,675,128 shares of the registrant's Class A common stock, no par value (being the registrant's only class of common stock outstanding) were outstanding.~~Yes o No þ

As of November 7, 2017, 19,679,345 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	~~PART I—FINANCIAL INFORMATION~~
Item 1.	Financial Statements.	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	1718
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	2526
Item 4.	Controls and Procedures.	2526
PART II—OTHER INFORMATION	~~PART II—OTHER INFORMATION~~
Item 1.	Legal Proceedings.	2627
Item 1A.	Risk Factors.	2627
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2627
Item 3.	Defaults Upon Senior Securities.	2627
Item 4.	Mine Safety Disclosures.	2627
Item 5.	Other Information.	2627
Item 6.	Exhibits.	2627
SIGNATURES	~~SIGNATURES~~	2729

NUMEREX CORP. AND SUBSIDIARIES

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Index to Financial Statements	Page
	Page
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	4
Index to Financial Statements
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2017 and 2016	5
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	4
Unaudited Condensed Consolidated Statement of Shareholders' Equity for the six months ended June 30, 2017	6
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016	5
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016	7
Unaudited Condensed Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 2017	6
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	7
Unaudited Condensed Notes to Consolidated Financial Statements	8

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	June 30,			December 31,
	September 30,			December 31,
	2017			2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	56,~~354~~575		$	9,285
Restricted cash		221			221
Accounts receivable, less allowance for doubtful accounts of $686 and $767		8,141			9,436
Accounts receivable, less allowance for doubtful accounts of $583 and $767		8,961			9,436
Financing receivables, current		1,~~606~~521			1,778
Inventory, net of reserves		85,~~566~~909			9,011
Prepaid expenses and other current assets		1,~~329~~461			1,421
TOTAL CURRENT ASSETS		2524,~~217~~648			31,152
Financing receivables, less current portion		1,~~785~~580			2,227
Property and equipment, net of accumulated depreciation and amortization		5,~~727~~608			6,022
Software, net of accumulated amortization		5,~~818~~654			6,530
Other intangible assets, net of accumulated amortization		1110,~~121~~773			11,519
Goodwill		33,554			33,554
Other assets		~~241~~269			474
TOTAL ASSETS	$	8382,~~463~~086		$	91,478
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1315,~~775~~007		$	15,894
Accrued expenses and other current liabilities		2,~~524~~127			3,209
Deferred revenues		1,~~411~~491			1,882
Current maturities of long-term debt, net of debt issuance costs		45,~~799~~702			1,275
Current obligations under capital lease		~~309~~312			291
TOTAL CURRENT LIABILITIES		2224,~~818~~639			22,551
Long-term debt, net of debt issuance costs, less current maturities		10,~~266~~043			14,885
Obligations under capital lease, noncurrent		~~671~~608			797
Deferred tax liabilities, noncurrent		~~626~~705			468
Other liabilities		1,~~346~~435			1,512
TOTAL LIABILITIES		3537,~~727~~430			40,213
SHAREHOLDERS’ EQUITY
Preferred stock, no par value; 3,000 authorized; none issued		-			-
Class A common stock, no par value; 30,000 authorized; 21,034 and 20,935 issued; 19,571 and 19,608 outstanding		-			-
Class A common stock, no par value; 30,000 authorized;
21,138 and 20,935 issued; 19,675 and 19,608 outstanding		-			-
Class B common stock, no par value; 5,000 authorized; none issued		-			-
Additional paid-in capital		~~108~~109,~~985~~333			105,112
Treasury stock, at cost, 1,463 and 1,327 shares		(5,773	)		(5,466	)
Accumulated other comprehensive loss		(104	)		(110	)
Accumulated deficit		(5558,~~372~~800	)		(48,271	)
TOTAL SHAREHOLDERS' EQUITY		4744,~~736~~656			51,265
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8382,~~463~~086		$	91,478

The accompanying notes are an integral part of these financial statements

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED ~~STATEMENTS~~ STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS ~~INCOME~~

(In thousands, except per share data)

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2017			2016			2017			2016
Net revenues:
Subscription and support revenues	$	1211,~~680~~983		$	14,~~810~~388		$	2638,~~150~~133		$	2944,~~794~~183
Embedded devices and hardware		13,~~300~~320			23,~~796~~024			47,~~216~~535			58,~~862~~886
Total net revenues		1315,~~980~~303			17,~~606~~412			3045,~~366~~668			3553,~~656~~069
Cost of sales
Subscription and support revenues		5,~~364~~087			5,~~713~~828			1015,~~828~~915			1117,~~414~~242
Embedded devices and hardware		13,~~312~~458			3,~~314~~082			47,~~344~~748			69,~~432~~027
Gross profit		7,304			8,579			15,194			17,810
Inventory reserves		1,301			27			1,355			514
Gross profit		5,457			8,475			20,650			26,286
Operating expenses:
Sales and marketing		2,~~693~~183			3,~~270~~229			58,~~835~~019			69,~~215~~444
General and administrative		2,~~431~~314			3,~~859~~280			57,~~377~~691			711,~~988~~269
Engineering and development		1,~~704~~341			2,~~444~~229			35,~~919~~260			46,~~691~~920
Depreciation and amortization		1,~~443~~426			1,~~677~~658			24,~~966~~392			34,~~335~~992
Impairment of goodwill and other intangible assets		-			~~4,172~~-			-			4,172
Restructuring charges		~~355~~655			~~1,243~~276			~~780~~1,435			1,~~243~~520
Operating loss		(12,~~322~~462	)		(82,~~086~~197	)		(36,~~683~~147	)		(912,~~834~~031	)
Interest expense		~~742~~919			~~460~~469			12,~~363~~282			~~727~~1,196
Loss on extinguishment of debt		~~861~~-			-			1,089			290
Other expense (income), net		70			(22	)		801			(65	)
Other (income) expense, net		(34	)		(33	)		767			(99	)
Loss before income taxes		(23,~~995~~347	)		(82,~~524~~633	)		(610,~~936~~285	)		(1013,~~786~~418	)
Income tax expense (benefit)		8179			(~~234~~87	)		~~165~~244			(~~170~~257	)
Net loss		(3,~~076~~426	)		(82,~~290~~546	)		(710,~~101~~529	)		(1013,~~616~~161	)
Other items of comprehensive loss, net of income taxes:
Other items of comprehensive (loss) income, net of income taxes:
Foreign currency translation adjustment		-			1			(6	)		~~(14~~12	)
Comprehensive loss	$	(3,~~076~~426	)	$	(82,~~291~~545	)	$	(710,~~095~~535	)	$	(1013,~~602~~149	)
Loss per share:
Basic	$	(0.1617	)	$	(0.4313	)	$	(0.3654	)	$	(0.5568	)
Diluted	$	(0.1617	)	$	(0.4313	)	$	(0.3654	)	$	(0.5568	)
Weighted average shares outstanding used in per share calculation:
Weighted average shares outstanding used in per share calculation
Basic		19,~~555~~646			19,~~449~~542			19,~~539~~575			19,~~413~~456
Diluted		19,~~555~~646			19,~~449~~542			19,~~539~~575			19,~~413~~456

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

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(in thousands)

									Accumulated Other						Total
	Common		Additional			Treasury			Comprehensive			Accumulated			Shareholders'
	Shares		Paid-in Capital			Stock			Loss			Deficit			Equity
Balance at January 1, 2017		20,935	$	105,112		$	(5,466	)	$	(110	)	$	(48,271	)	$	51,265
Equity-based compensation expense		-		1,~~034~~400			-			-			-			1,~~033~~400
Exercises, vesting and other equity- based compensation plan activity, net		99					(289	)		-			-			(289	)
Exercises, vesting and other equity-
Value of shares retained to pay employee taxes		-		(184	)		(18	)		-			-			(202	)
based compensation plan activity, net		203					(289	)		-			-			(289	)
Warrants issued		-		3,023			-			-			-			3,023
Value of shares retained to pay employee taxes				(202	)		(18	)								(220	)
Warrants issued				3,023			-			-			-			3,023
Translation adjustment		-		-			-			6			-			6
Net loss		-		-			-			-			(710,~~101~~529	)		(710,~~101~~529	)
Balance at June 30, 2016		21,034	$	108,985		$	(5,773	)	$	(104	)	$	(55,372	)	$	47,736
Balance at September 30, 2017		21,138	$	109,333		$	(5,773	)	$	(104	)	$	(58,800	)	$	44,656

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

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED ~~STATEMENTS~~ STATEMENTS OF CASH FLOWS

(In thousands)

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(710,~~101~~529	)	$	(1013,~~616~~161	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash (used in)
Depreciation and amortization		3,874			3,968
operating activities:
Depreciation and amortization		5,757			5,997
Impairment of goodwill and other intangible assets		-			4,172
Non-cash restructuring charges		-			~~370~~345
Equity-based compensation expense		~~745~~1,111			12,~~451~~202
Loss on extinguishment of debt		1,089			290
Deferred income taxes		~~157~~237			(~~179~~268	)
Bad debt expense		~~144~~235			~~228~~327
Provision for inventory reserves		~~(96~~1,355	)		~~487~~514
Other non-cash expense		294			72
Non-cash interest		975			138
Changes in assets and liabilities:
Accounts and financing receivables		1,~~765~~143			(~~1,004~~303	)
Inventory, net		~~(604~~110	)		(~~844~~1,323	)
Accounts payable		(~~2,124~~887	)		~~421~~427
Deferred revenue		(~~566~~345	)		(~~454~~554	)
Other		(~~429~~1,036	)		~~253~~394
Net cash used in operating activities		(~~2,852~~785	)		(~~1,385~~803	)
Cash flows from investing activities:
Purchases of property and equipment		(~~213~~315	)		(~~509~~789	)
Capitalized software development and purchases of software		(1,~~101~~767	)		(1,~~280~~662	)
Net cash used in investing activities		(12,~~314~~082	)		(12,~~789~~451	)
Cash flows from financing activities:
Proceeds from long-term debt		18,591			17,000
Principal payments on debt		(17,000	)		(19,349	)
Principal payments on capital lease obligations		(~~108~~168	)		-
Exercises, vesting and other equity- based compensation plan activity		-			386
Exercises, vesting and other equity-
Payment of taxes on equity-based awards		(202	)		(173	)
based compensation plan activity		-			486
Payment of taxes on equity-based awards		(220	)		(258	)
Deferred financing costs paid		(1,046	)		(1,038	)
Net cash provided by (used in) financing activities		~~235~~157			(3,~~174~~159	)
Net decrease in cash and cash equivalents		(32,~~931~~710	)		(6,~~348~~413	)
Cash and cash equivalents at beginning of period		9,285			169,~~237~~285
Cash and cash equivalents at end of period	$	56,~~354~~575		$	92,~~889~~872
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,~~147~~307		$	~~645~~1,047
Net cash paid for income taxes		169			6
Disclosure of non-cash investing and financing activities:
Capital expenditures in accounts payable		~~189~~222			~~274~~196
Fixed assets acquired under a capital lease		-			1,237
Warrants issued to Kenneth Rainin Foundation		595			-
Warrants issued to Hale Capital		2,428			-
Transfer of inventory to monitoring equipment		1,~~143~~636			12,~~454~~087

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

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED ~~NOTES TO~~ CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2017

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Numerex Corp. (NASDAQ: NMRX) ~~(the “Company”)~~ is a holding company incorporated in Pennsylvania, and through its subsidiaries, is a single source, leading provider of managed enterprise solutions enabling the ~~Internet~~ Internet of Things (IoT). An IoT solution is generally viewed as a combination of devices, software and services that operate ~~with~~ with little or no human interaction. Our managed IoT solutions are simple, innovative, scalable and secure. Our solutions incorporate each of the four key IoT building blocks – Device, Network, Application and Platform. We provide our technology and service solutions through our integrated IoT horizontal platforms, which are generally sold on a subscription basis. Foreign operations were not significant to us for the three and ~~six~~nine months ended ~~June~~September 30, 2017 or 2016.

Basis of Presentation

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

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 ~~June~~September 30, 2017 and our operating results and cash flows for the interim periods presented. The accompanying condensed consolidated balance sheet as of December 31, 2016 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, 2016 which includes information and disclosures not included in this quarterly report.

8Estimates and Assumptions

~~NUMEREX~~The ~~CORP~~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. ~~AND~~Actual ~~SUBSIDIARIES~~results may differ materially from these estimates. Operating results for the three or nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017 or any future periods.

~~UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Liquidity

~~June~~The Company incurred an operating loss totaling $6.1 million and cash used in operations was $0.8 million for the nine months ended September 30, 2017. The Company also incurred an operating loss totaling $22.8 million and cash used in operations totaled $0.5 million for the year ended December 31, 2016. As of September 30, 2017, the Company has an accumulated deficit of $58.8 million, and cash and cash equivalents of $6.6 million. The Company’s cash flow requirements during the fiscal year 2016 and to date in 2017 were financed by cash on hand, cash generated by operations, and proceeds from the recent financing with Hale. The Company had total term debt (net of deferred financing costs), including current portion, of $15.7 million as of September 30, 2017. The Company’s ability to continue in business is dependent on its ability to continue to generate operating cash flows, to maintain sufficient cash on hand, to raise additional capital, and to control expenditures. Management believes that the Company will maintain sufficient liquidity through at least September 2018. The consolidated financial statements do not include any adjustments that might result from this uncertainty.

~~Estimates and Assumptions~~8

~~The~~NUMEREX 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 liabilitiesCORP. ~~Actual~~AND results may differ materially from these estimates. Operating results for the three or six months ended June 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017 or any future periods.SUBSIDIARIES

~~Liquidity~~UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~The~~September ~~Company incurred an operating loss totaling $3.7 million and cash used in operations was $2.9 million for the six months ended June~~ 30, 2017. The Company also incurred an operating loss totaling $22.8 million and cash used in operations totaled $0.5 million for the year ended December 31, 2016. As of June 30, 2017, the Company has an accumulated deficit of $55.4 million, and cash and cash equivalents of $5.6 million. The Company’s cash flow requirements during the fiscal year 2016 and to date in 2017 were financed by cash on hand, cash generated by operations, and proceeds from the recent financing with Hale Capital Partners LP described in Note F below. The Company had total term debt (net of deferred financing costs), including current portion, of $15.1 million as of June 30, 2017. The Company’s ability to continue in business is dependent on its ability to continue to generate operating cash flows, to maintain sufficient cash on hand, to raise additional capital, and to control expenditures. Management believes that the Company will maintain sufficient liquidity through at least August 2018. The consolidated financial statements do not include any adjustments that might result from this uncertainty.

Restricted Cash

As of ~~June~~September 30, 2017, and 2016, cash of $0.2 million was held in escrow related to certain vendor obligations.

NOTE B - INVENTORY

Inventory consisted of the following (in thousands):

	June 30,			December 31,
	September 30,			December 31,
	2017			2016
Raw materials	$	21,~~313~~843		$	2,953
Finished goods		75,~~918~~747		$	8,504
Inventory reserves		(1,~~665~~681	)	$	(2,446	)
	$	85,~~566~~909		$	9,011

During the three and ~~six~~nine months ended ~~June~~September 30, 2017, we transferred $0.65 million and $1.16 million of inventory, ~~respectively,~~ to monitoring equipment within property and equipment, respectively, and disposed of $0.0 million and $0.3 million of fully reserved inventory, respectively.

NOTE C – PROPERTY AND EQUIPMENT

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

	June 30,			December 31,
	September 30,			December 31,
	2017			2016
Computer, network and other equipment	$	8,~~840~~924		$	8,805
Monitoring equipment		67,~~836~~328			5,692
Furniture and fixtures		486			486
Leasehold improvements		~~254~~255			264
Total property and equipment		16,~~416~~993			15,247
Accumulated depreciation and amortization		(1011,~~689~~385	)		(9,225	)
	$	5,~~727~~608		$	6,022

During the three and ~~six months~~nine months ended ~~June~~September 30, 2017, we transferred $0.65 million and $1.16 million of inventory to monitoring equipment as part of our managed services business. Depreciation and amortization related to property and equipment was $0.3 million and $0.69 million for the three and ~~six~~ nine months ended ~~June~~September 30, 2017, respectively. Depreciation and amortization related to property and equipment was $0.4 million and $01.81 million for the three and ~~six~~nine months ended ~~June~~September 30, 2016, respectively.

NOTE D – INTANGIBLE ASSETS

Impairment Charges

We recorded $4.2 million in impairment charges for trade names, technology and goodwill as of June 30, 2016. The Omnilink and Do-It-Yourself (DIY) product lines and reporting units had not generated results of operations consistent with our expectations and forecasts for the three months ended June 30, 2016. The lower operating results and future expectations for Omnilink were principally related to strategic changes and delays associated with the launch of a new personal tracking product line. We also continue to evaluate different strategic options for the DIY reporting unit. ~~These~~ These factors were triggering events that indicated that it was more likely than not that the fair value of the Omnilink and DIY ~~reporting~~ reporting units were less than their carrying amounts. As a result, we performed initial assessments of goodwill for impairment, along with other intangible assets of the reporting units, as of June 30, 2016. ~~No triggering events were identified as of June 30, 2017.~~

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED ~~NOTES TO~~ CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2017

We estimated the fair value of the reporting units using a combination of market and income approaches and concluded that the estimated fair value of the Omnilink and DIY reporting units were less than their carrying values. We assessed the implied fair value of goodwill in the same manner as if we were acquiring the reporting units in a business combination. Specifically, we allocated the estimated fair value of the reporting units to all of the assets and liabilities of those units, including any unrecognized intangible assets, in a hypothetical calculation, referred to as Step Two. We assessed the amortizing long-lived assets for impairment based on undiscounted cash flows and concluded that, with the exception of DIY technology, the carrying values of other amortizing long-lived assets and intangible assets were recoverable.

Based on Step Two calculations, we recorded non-cash impairment charges as of June 30, 2016 of $1.6 million for indefinite-lived trade names and $2.3 million for goodwill of the Omnilink reporting unit, and $0.1 million for technology and $0.2 million for goodwill of the DIY reporting unit.

	Omnilink						DIY						Total
	Trade Names			Goodwill			Technology			Goodwill			Impairment
January 1, 2016	$	2,972		$	17,580		$	245		$	1,656
Amortization		-			-			(1827	)		-
Impairment		(1,612	)		(2,264	)		(81	)		(215	)	$	(4,172	)
June 30, 2016	$	1,360		$	15,316		$	146		$	1,441
September 30, 2016	$	1,360		$	15,316		$	137		$	1,441

Intangible Assets Other Than Goodwill

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

	As of June 30, 2017									As of December 31, 2016
	As of September 30, 2017									As of December 31, 2016
	Remaining Useful Lives		Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased and developed software		1.95	$	19,~~043~~060	$	(1415,~~391~~176	)	$	43,~~652~~884	$	18,205	$	(12,806	)	$	5,399
Software in development		n/a		1,~~166~~770		-			1,~~166~~770		1,131		-			1,131
Total software				20,~~209~~830		(1415,~~391~~176	)		5,~~818~~654		19,336		(12,806	)		6,530
Licenses		2.56		13,215		(12,~~787~~864	)		~~428~~351		13,215		(12,534	)		681
Customer relationships		6.98		8,167		(3,~~416~~604	)		4,~~751~~563		8,167		(3,039	)		5,128
Technologies		10.32		4,235		(~~899~~984	)		3,~~336~~251		4,235		(822	)		3,413
Patents and trademarks		1.64		4,~~256~~313		(2,~~568~~623	)		1,~~688~~690		3,747		(2,368	)		1,379
Trade names		Indefinite		918		-			918		918		-			918
Total other intangible assets				30,~~791~~848		(1920,~~670~~075	)		1110,~~121~~773		30,282		(18,763	)		11,519
			$	51,~~000~~678	$	(3435,~~061~~251	)	$	16,~~939~~427	$	49,618	$	(31,569	)	$	18,049

Remaining useful lives in the preceding table were calculated on a weighted average basis as of ~~June~~September 30, 2017. We did not incur ~~significant~~ significant costs to renew or extend the term of acquired intangible assets during the three or ~~six~~nine months ending ~~June~~September 30, 2017.

Amortization expense related to intangible assets was $1.2 million and $2.3 million for the three and six months ended June 30, 2017, respectively. Amortization expense related to intangible assets was $1.3 million and $2.6 million for the three and six months ended June 30, 2016, respectively. Amortization expense recorded in cost of subscription revenues was $0.4 million and $0.8 million, respectively, for the three and six months ended June 30, 2017, compared to $0.3 million and $0.6 million, respectively, for the three and six months ended June 30, 2016. Additionally, we have capitalized approximately $0.7 million and $1.3 million of internally generated software development costs for the three and six months ended June 30, 2017, respectively, and $0.3 million and $0.6 million for the three and six months ended June 30, 2016, respectively.10

10NUMEREX CORP. AND SUBSIDIARIES

~~NUMEREX~~UNAUDITED ~~CORP.~~CONDENSED ~~AND~~CONSOLIDATED ~~SUBSIDIARIES~~FINANCIAL STATEMENTS

~~UNAUDITED~~September ~~CONDENSED~~30, ~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~2017

~~June~~Amortization expense related to intangible assets was $1.2 million and $3.5 million for the three and nine months ended September 30, 2017, respectively. Amortization expense related to intangible assets was $1.3 million and $2.6 million for the three and nine months ended September 30, 2016, respectively. Amortization expense recorded in cost of subscription revenues was $0.5 million and $1.3 million, respectively, for the three and nine months ended September 30, 2017, compared to $0.4 million and $1.0 million, respectively, for the three and nine months ended September 30, 2016. Additionally, we have capitalized approximately $0.6 million and $1.8 million of internally generated software development costs for the three and nine months ended September 30, 2017, respectively, and $0.5 million and $1.1 million for the three and nine months ended September 30, 2016, 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 are individually computed and recognized in the interim period in which those items occur.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider projections of future taxable income, tax planning strategies and the reversal of temporary differences in making this assessment.

During 2015, we determined that we would not meet the criteria of “more likely than not” that our federal and state net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our assessment of both positive and negative evidence regarding realization of our deferred tax assets, in particular, the strong negative evidence associated with our cumulative loss over the past three years. Accordingly, we recorded a valuation allowance against these items. The deferred tax assets consist of federal net operating losses, state net operating losses, tax credits, and other deferred tax assets, most of which expire between 2017 and 2036. We will maintain the valuation allowance against the net deferred tax assets until sufficient positive evidence outweighs any negative evidence to support reversal. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance.

As a result of recording a valuation allowance, we recognized deferred tax expense of less than $0.1 million and $0.2 million, representing an effective tax rate of (2.24%), for the three months and ~~six~~nine months ended ~~June~~September 30, 2017. The deferred tax expense recognized on a net loss before income taxes, and the difference in the effective tax rate from the federal statutory rate, is due primarily to the book and tax basis and accounting differences for certain long and indefinite lived intangible assets. We have also recognized a provision for income tax expense for certain state income taxes that cannot utilize offsetting net operating losses. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance.

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2012 through 2016 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from earlier years in which net operating losses have arisen are still open for examination by the tax authorities.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED ~~NOTES TO~~ CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2017

NOTE F – DEBT

Debt consisted of the following (dollars in thousands):

	June 30,			December 31,
	September 30,			December 31,
	2017			2016
Notes payable to Hale Capital	$	13,~~595~~981		$	-
Note payable to Kenneth Rainin Foundation (a related party)		5,000			-
Note payable to Crystal Financial LLC, with interest at LIBOR plus margin		-			17,000
Less deferred financing costs		(3,~~530~~236	)		(840	)
		15,065			16,160
		15,745			16,160
Less current portion of long-term debt (net of deferred financing costs)		(45,~~799~~702	)		(1,275	)
Noncurrent portion of long-term debt	$	10,~~266~~043		$	14,885

Hale ~~Capital Note Purchase Agreement~~Notes

On June 7, 2017 (the "Closing Date"), the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the purchasers from time to time party thereto, and HCP-FVF, LLC, an affiliate of Hale Capital Partners LP, as collateral agent and as purchaser ("Hale Capital"). Pursuant to the Note Purchase Agreement, the Company issued and sold to Hale Capital senior secured promissory notes in an aggregate original principal amount of $13.5 million (the "Notes"), the proceeds of which were used to repay the outstanding term loans and other obligations under the Term Loan Agreement, dated as of March 9, 2016, by and among the Company, certain subsidiaries of the Company, the lenders party thereto and Crystal Financial LLC (the “Crystal Loan Agreement”). We recorded a charge of $01.81 million to loss on extinguishment of debt, of which $0.5 million related to unamortized deferred financing costs related to the Crystal Loan Agreement, and $0.36 million related to prepayment penalties and other extinguishment related costs, which is recorded as a separate line item on the consolidated statement of operations and comprehensive loss for the ~~three~~nine month period ended ~~June~~ September 30, 2017.

The Notes are secured by a first priority security interest in substantially all assets of the Company and its subsidiaries. The Notes bear interest at a rate equal to the prime rate plus 700 (currently 11% per year), payable monthly in arrears. From June 7, 2017 until June 29, 2018, the monthly interest payment will be in the form of additional Notes. Thereafter, the interest will be payable monthly in cash in arrears. Interest on the Notes will be computed on the basis of a 360-day year comprising twelve 30-day months. The Notes will bear interest at a rate five percent (5%) above the otherwise applicable interest rate during the continuance of a default or event of default.

The maturity date of the Notes is March 31, 2021. Beginning June 30, 2018, the Company is required to prepay the Notes in principal installments of $250,000 per month. In addition, the Company will be required to redeem all of the Notes upon a change of control and will be required to make mandatory prepayments on the Notes with the net proceeds of (i) any voluntary or involuntary sale or disposition of assets (including casualty losses and condemnation awards, subject to certain exceptions) and (ii) the issuance or sale of any equity, except for a portion of which may be used to pay down the Company's existing subordinated note. The Company may also prepay to Notes in whole or in part at any time.

All prepayments of the Notes (whether mandatory, optional or as result of the acceleration of the Notes) are subject to a prepayment penalty as follows: (A) if prepayment is on or before the second anniversary of the Closing Date, 5% of the principal prepaid; (B) if prepayment is after the second anniversary but on or before the third anniversary of the Closing Date, 3% of the principal prepaid; and (C) if prepayment is after the third year anniversary but before the maturity date, 1% of the principal prepaid.

Pursuant to the terms of ~~the~~ the Notes, the Company is required to meet certain financial and other restrictive covenants customary with this type of facility, including maintaining a minimum EBITDA, Minimum Total Liquidity, Minimum Liquidity and minimum Monthly Recurring Revenue, as defined in the Note Purchase Agreement. The Company was in compliance with these covenants as of ~~June~~September 30, 2017. Additionally, the Company is also prohibited from taking certain actions during the term of the Notes without consent of the purchasers, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, disposing of or permitting liens or other encumbrances on the Company's assets and making restricted payments, including cash ~~dividends~~ dividends on shares of the Company's common stock, except as expressly permitted under the Note Purchase Agreement.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED ~~NOTES TO~~ CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2017

The Note Purchase 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 Note Purchase Agreement may be accelerated. The Note Purchase Agreement and related Note documents also contain additional representations and warranties, covenants, indemnities and conditions, in each case customary for transactions of this type.

In connection with the execution of the Note Purchase Agreement, the Company issued to Hale Capital detachable warrants to purchase up to 895,944 shares of common stock (subject to adjustment) at an exercise price equal to $4.14 per share. The exercise price of the warrants is subject to adjustment upon certain events, including a down round provision, and the term of the warrants is ten years from the Closing Date. The warrants were valued using a Monte Carlo valuation model and had a fair value at grant date of $2.4 million. The warrants have been recorded as deferred financing costs, and are being amortized over the term of the Notes.

Senior Subordinated Promissory Note

On March 31, 2017, the Kenneth Rainin Foundation, a ~~California~~ California corporation, and the Company entered into a Senior Subordinated Promissory Note (~~the~~ “KRF Note”) in the ~~aggregate~~ ~~principal~~ amount of $5.0 million, with a maturity date of April 1, 2018, and an annual interest rate of 12%, which was used to pay down a portion of the outstanding term loans under the Crystal Loan Agreement ~~on March 31, 2017~~.

In connection with the KRF Note, the Company issued to Kenneth ~~Rainin~~ Rainin Foundation a warrant to purchase 125,000 shares of our common stock at a warrant price of $0.01 per share. The warrants had a fair value of $0.6 million at the grant date, have been recorded as deferred financing costs, and are being amortized over the term of the KRF Note. Brian Igoe, a director of the Company, is the Chief Investment Officer of the Kenneth Rainin Foundation.

Crystal Term Loan Agreement - Amendment, Waiver and Repayment

On March 31, 2017, we entered into an amendment to the Crystal ~~Loan~~ Loan Agreement which, among other things, (i) required a $5.0 million prepayment of the term loans with the proceeds of the KRF Note, (ii) required the payment of an amendment fee in the amount of $2.0 million, half of which was paid upon execution of the amendment, with the remainder due only if certain events did not occur by June 1, 2017 (which date was subsequently extended to June 7, 2017), (iii) modified the covenants related to minimum adjusted EBITDA, minimum fixed charge coverage ratio, maximum net leverage, and maximum subscriber churn, (iv) waived certain specified events of default, including financial covenant defaults, (v) increased the interest rate payable on the term loans from 8.5% to 10.5%, and (vi) required a prepayment in the amount of $2.0 million if certain events did not occur by June 1, 2017 (which date was subsequently extended to June 7, 2017).

As a result of the $5.0 million prepayment of the term loans with the proceeds of the KRF Note, we recorded a $0.2 million loss on partial extinguishment of the Crystal Loan Agreement, which is recorded as a separate line item on the consolidated statement of operations for the three month period ending March 31, 2017.

~~One~~On June 7, 2017, all outstanding term loans and other obligations under the Crystal Loan Agreement were repaid in full with the proceeds of the Notes issued pursuant to the Note Purchase Agreement.

NOTE G – NET LOSS PER SHARE

Basic (loss) earnings per share attributable to common shareholders is based on the weighted-average number of common shares outstanding excluding the dilutive impact of common stock equivalents. Diluted (loss) 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 shares does not assume exercise of securities that would have an anti-dilutive effect on earnings. Diluted (loss) earnings per share is not presented separately because there are no adjustments to the numerator in calculating dilutive net loss per share and all potentially dilutive common stock equivalents would be antidilutive. ~~The following table presents a reconciliation of the shares used in the calculation of basic and dilutive (loss) earnings per share and anti-dilutive equity based compensation awards (in thousands):~~

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED ~~NOTES TO~~ CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2017

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Weighted average common shares outstanding:
Basic		19,555		19,449		19,539		19,413
Dilutive effect of common stock equivalents		-		-		-		-
Diluted		19,555		19,449		19,539		19,413
Anti-dilutive equity-based compensation awards		1,178		2,158		1,122		2,158

The following table presents a reconciliation of the shares used in the calculation of basic and dilutive (loss) earnings per share and anti-dilutive equity based compensation awards (in thousands):

NOTE H – RESTRUCTURING

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

Weighted average common shares outstanding
Basic		19,646		19,542		19,575		19,456
Dilutive effect of commons stock equivalents		-		-		-		-
Total		19,646		19,542		19,575		19,456

Anti-dilutive equity-based compensation awards		1,091		1,571		1,035		1,576

WeNOTE ~~recorded~~H a– restructuring charge of $0.8 million, which included $0.4 million of severance costs for the six months ended June 30, 2017. The other costs recorded as restructuring are comprised of $0.2 million for the loss on sublease of our Dallas office, and $0.2 million in legal costs.RESTRUCTURING

~~NOTE~~We Irecorded –restructuring ~~FAIR~~charges ~~VALUE~~of $1.4 million and $1.5 ~~MEASUREMENTS~~million, for the nine months ended September 30, 2017 and 2016 respectively. The restructuring charges for the nine months ended September 30, 2017 include $0.6 million of severance costs, $0.7 million of legal costs, and $0.1 million for the loss on sublease of our Dallas office. The restructuring charges for the nine months ended September 30, 2016 include $0.8 million related to the relocation of our corporate headquarters and $0.7 million in severance costs.

WeNOTE ~~account~~I ~~for~~– ~~certain~~FAIR ~~assets at fair value.~~VALUE The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:MEASUREMENTS

~~Level 1 –~~We account for certain assets at fair value. ~~Valuations~~The hierarchy below lists three levels of fair value based on ~~quoted~~the ~~prices~~extent ~~for~~to ~~identical~~which ~~assets~~inputs ~~and~~used ~~liabilities~~in measuring fair value are observable in ~~active~~the ~~markets~~market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 21 – Valuations based on ~~observable inputs other than~~ quoted prices ~~included in Level 1, such as quoted prices~~ for ~~similar assets and liabilities in active markets, quoted prices for~~ identical ~~or similar~~ assets and liabilities in ~~markets that are not~~ active, ~~or other inputs that are observable or can be corroborated by observable market data~~markets.

Level 32 – Valuations based on ~~unobservable~~observable inputs ~~reflecting~~other ~~our~~than ~~own~~quoted ~~assumptions~~prices included in Level 1, ~~consistent~~such ~~with~~as ~~reasonably~~quoted ~~available~~prices ~~assumptions~~for ~~made~~similar byassets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other ~~market~~inputs ~~participants.~~that ~~These~~are ~~valuations~~observable ~~require~~or ~~significant~~can ~~judgment~~be corroborated by observable market data.

WeLevel 3 – Valuations ~~have~~based noon ~~assets~~unobservable ~~measured~~inputs atreflecting ~~fair~~our ~~value on~~own aassumptions, ~~recurring~~consistent ~~basis.~~with Wereasonably doavailable ~~not~~assumptions ~~have~~made ~~any~~by other ~~liabilities~~market ~~measured~~participants. atThese ~~fair~~valuations ~~value~~require onsignificant ~~a recurring basis~~judgment.

14We have no assets measured at fair value on a recurring basis. We do not have any liabilities measured at fair value on a recurring basis.

~~NUMEREX CORP. AND SUBSIDIARIES~~14

~~UNAUDITED~~NUMEREX ~~CONDENSED~~CORP. ~~NOTES~~AND ~~TO CONSOLIDATED FINANCIAL STATEMENTS~~SUBSIDIARIES

~~June~~UNAUDITED ~~30,~~CONDENSED ~~2017~~CONSOLIDATED FINANCIAL STATEMENTS

~~The~~September ~~following table summarizes assets measured at fair value on a nonrecurring basis during the six months ended June~~ 30, ~~2016 (in thousands):~~2017

	Fair				Total
	Value		Level 3		Losses
April 1, 2016
Omnilink Reporting Unit
Indefinite lived trade names	$	1,360	$	1,360	$	1,612
Goodwill		15,316		15,316		2,264
DIY Reporting Unit
Technology		146		146		81
Goodwill		1,441		1,441		215
Total nonrecurring fair value measurements	$	18,263	$	18,263	$	4,172

The following table summarizes assets measured at fair value on a nonrecurring basis during the nine months ended September 30, 2016 (in thousands):

NOTE J – RECENT ACCOUNTING PRONOUNCEMENTS

	Fair				Total
	Value		Level 3		Losses
April 1, 2016
Omnilink Reporting Unit
Indefinite lived trade names	$	1,360	$	1,360	$	1,612
Goodwill		15,316		15,316		2,264
DIY Reporting Unit
Technology		146		146		81
Goodwill		1,441		1,441		215
Total nonrecurring fair value measurements	$	18,263	$	18,263	$	4,172

InNOTE ~~January~~J ~~2017,~~– ~~the~~MERGER Financial Accounting Standards Board (FASB) issued guidance simplifying the test for goodwill impairment. The guidance eliminates step two from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The updated guidance requires a prospective adoption, with early adoption permitted. The guidance is effective for the Company beginning in 2020. The Company is in the process of evaluating the effects of the provisions of this guidance on our financial statements.AGREEMENT

InOn ~~January~~August 2, 2017, the ~~FASB~~Company ~~issued~~entered ~~guidance~~into toan ~~assist~~Agreement ~~entities~~and inPlan ~~evaluating~~of ~~whether~~Merger ~~transactions~~(the ~~should~~“Merger beAgreement”) ~~accounted~~with ~~for~~Sierra asWireless, ~~acquisitions~~Inc., ~~(or~~a ~~disposals~~Canadian corporation (“Sierra”), ofand ~~assets~~Wireless Acquisition orSub, ~~businesses~~Inc., ~~The~~a ~~updated~~Delaware ~~guidance requires~~corporation and a ~~prospective~~direct, ~~adoption.~~wholly-owned ~~Early~~subsidiary ~~adoption~~of isSierra ~~permitted~~(“Merger Sub”). ~~This~~The ~~update~~Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will bemerge ~~effective~~with ~~for~~and into the Company, with ~~beginning~~the inCompany ~~2018~~surviving as a wholly-owned subsidiary of Sierra (the “Merger”). The ~~Company~~Merger ~~does~~Agreement ~~not~~was ~~expect~~unanimously approved ~~the~~and ~~provisions~~adopted ofby ~~this~~the ~~guidance~~board toof ~~have~~directors aof ~~material~~each ~~impact~~of onthe ~~our~~Company ~~financial~~and ~~statements~~Sierra.

InSubject ~~November 2016~~to the terms and conditions of the Merger Agreement, at the ~~FASB~~effective ~~issued~~time ~~guidance~~of ~~impacting~~the ~~restricted~~Merger ~~cash~~(the ~~presentation~~“Effective onTime”), the ~~statement~~Company’s ofshareholders ~~cash~~will ~~flows.~~have ~~The~~the ~~guidance~~right ~~requires~~to ~~that~~receive a0.1800 ~~statement~~common ofshares, ~~cash~~no ~~flows~~par ~~explain~~value, ~~the~~of ~~change~~Sierra ~~during~~(“Sierra ~~the~~Common ~~period~~Stock”) for each share of ~~cash~~Class A common stock, ~~cash~~no ~~equivalents~~par value, ~~and~~of ~~amounts~~the ~~generally~~Company ~~described~~(“Company asCommon ~~restricted cash~~Stock”) or(such ~~restricted~~consideration, ~~cash~~the ~~equivalents~~“Merger Consideration”). ~~Amounts~~Additionally, each ~~generally~~outstanding ~~described~~restricted asstock ~~restricted~~unit, ~~cash~~in-the-money option and ~~restricted~~in-the-money ~~cash~~stock ~~equivalents~~appreciation ~~should~~right will be ~~included with~~cancelled ~~cash~~in ~~and~~exchange for ~~cash~~the ~~equivalents~~right ~~when~~to ~~reconciling~~receive the ~~beginning-of-period~~Merger ~~and~~Consideration ~~end-of-period~~in ~~total~~accordance ~~amounts~~with ~~shown on~~ the ~~statement~~ terms of ~~cash~~the ~~flows~~Merger Agreement. ~~This~~Except ~~standard~~as ~~becomes~~described ~~effective~~below and ~~for~~specified in the ~~Company~~Merger ~~during~~Agreement, ~~the~~if ~~first~~exercised ~~quarter~~following notice of ~~2018~~the ~~and~~Merger, ~~will~~each beoutstanding ~~applied~~warrant ~~using~~issued aby ~~retrospective~~the Company ~~approach~~will ~~for~~be ~~each~~cancelled ~~period~~in ~~presented.~~exchange ~~The~~for ~~Company~~the ~~does~~right ~~not~~to ~~expect~~receive the ~~provisions~~Merger ofConsideration ~~this~~or, ~~guidance~~if tonot ~~have~~exercised, awill ~~material~~be ~~impact on~~cancelled ~~our~~at ~~financial~~the Effective ~~statements~~Time.

InThe ~~February 2016~~Merger Agreement contains customary representations and warranties from each of the Company and Sierra, and each party to the ~~FASB issued~~Merger ~~guidance~~Agreement ~~that requires lessees~~ has agreed to customary covenants, including, among ~~recognize~~others, ~~most~~covenants ~~leases~~relating asto ~~assets~~(1) the conduct of the Company’s and ~~liabilities~~Sierra’s onbusinesses during the ~~balance~~interim ~~sheet.~~period ~~Qualitative~~between the execution of the Merger Agreement and ~~quantitative~~the ~~disclosures~~Effective ~~will~~Time, be(2) ~~enhanced~~ the obligation of the Company to ~~better~~call ~~understand~~a meeting of its shareholders to adopt the ~~amount~~Merger Agreement, ~~timing~~ and, ~~uncertainty~~subject ofto ~~cash~~certain ~~flows~~exceptions, ~~arising~~to ~~from~~recommend ~~leases.~~that ~~The~~its ~~guidance~~shareholders isadopt ~~effective~~the ~~for~~Merger ~~annual~~Agreement and ~~interim~~(3) ~~periods~~the ~~beginning~~Company’s ~~after~~non-solicitation ~~December~~obligations ~~15,~~relating ~~2018~~to alternative acquisition proposals. ~~The~~Each ~~updated~~of ~~standard mandates~~the aCompany ~~modified~~and Sierra ~~retrospective~~has ~~transition~~also ~~method~~agreed to apply for, or otherwise seek, and use its respective commercially reasonable efforts to obtain, all consents ~~with~~and ~~early~~approvals ~~adoption~~of ~~permitted. We~~governmental ~~are currently~~entities ~~evaluating~~required ~~the~~to ~~effect~~be ~~that~~obtained by it for the ~~updated~~consummation ~~standard~~of ~~will~~the ~~have~~transactions ~~on our financial~~contemplated by the ~~statements~~Merger Agreement.

InThe ~~May~~completion ~~2014,~~of the ~~FASB~~Merger ~~issued~~is ~~guidance~~subject ~~which~~to ~~amends~~customary ~~the existing~~conditions, ~~accounting~~including ~~standards~~(1) ~~for~~the ~~revenue~~adoption ~~recognition.~~of Inthe ~~August~~Merger ~~2015,~~Agreement by the ~~FASB~~Company’s ~~issued~~shareholders, ~~additional~~(2) ~~guidance~~the ~~which~~receipt ~~delays~~of ~~the~~conditional ~~effective date~~approval byof ~~one~~the ~~year.~~shares ~~The~~of ~~FASB~~Sierra ~~also~~Common ~~agreed~~Stock to ~~allow~~be ~~entities~~issued toin ~~choose to adopt~~ the ~~standard~~Merger asfor oflisting on the ~~original~~Toronto ~~effective~~Stock ~~date. In March 2016~~Exchange, ~~the~~subject ~~FASB~~only ~~issued~~to ~~guidance~~customary post-closing ~~which~~deliverables, ~~clarifies~~and ~~the implementation guidance~~ on ~~principal~~The ~~versus~~NASDAQ ~~agent~~Global ~~considerations.~~Market, ~~The~~subject ~~guidance includes~~only ~~indicators~~ to ~~assist~~official annotice ~~entity~~of inissuance, ~~determining~~(3) ~~whether~~the itexpiration ~~controls~~or early atermination ~~specified~~of ~~good~~all orapplicable ~~service~~waiting ~~before~~periods itapplicable ~~is transferred~~ to the ~~customers.~~consummation Weof ~~currently~~the ~~anticipate~~Merger ~~adopting~~under the ~~new~~Hart-Scott-Rodino ~~standard~~Antitrust Improvements ~~effective~~Act ~~January~~of 11976, ~~2018.~~as ~~The~~amended, ~~new~~(4) ~~standard~~the ~~also~~effectiveness ~~permits two methods~~ of ~~adoption:~~the ~~retrospectively~~registration tostatement ~~each~~on ~~prior~~Form ~~reporting~~F-4 ~~period~~by ~~presented~~the ~~(full~~Securities ~~retrospective~~and ~~method),~~Exchange Commission orfor ~~retrospectively with~~ the ~~cumulative~~Sierra ~~effect~~Common ofStock ~~initially~~to ~~applying~~be ~~the~~issued ~~guidance~~in ~~recognized~~the atMerger, (5) the ~~date~~absence of ~~initial~~any ~~application~~order, ~~(the~~injunction ~~modified~~or ~~retrospective method).~~other Welegal ~~currently~~restraint preventing ~~anticipate adopting~~ the ~~standard~~completion ~~using~~of the ~~modified~~Merger ~~retrospective~~or ~~method. We~~making ~~are concluding~~ the ~~assessment phase~~completion of ~~implementing~~the ~~this~~Merger ~~guidance.~~illegal Weand ~~have~~(6) ~~evaluated~~the ~~each~~absence of ~~the~~any ~~five~~pending ~~steps~~legal proceeding ininstituted ~~the~~by ~~new~~any ~~revenue~~governmental ~~recognition~~entity ~~model,~~seeking ~~which~~to ~~are~~restrain, ~~as follows:~~enjoin 1)or ~~Identify~~otherwise prohibit the ~~contract~~consummation ~~with~~of the ~~customer;~~transactions contemplated 2)by ~~Identify~~ the ~~performance~~Merger ~~obligations~~Agreement. inEach ~~the~~party’s ~~contract;~~obligation 3)to ~~Determine~~complete the ~~transaction~~ ~~price;~~Merger 4)is ~~Allocate~~also ~~the~~subject ~~transaction price~~ to ~~the~~certain ~~performance~~additional customary ~~obligations;~~conditions, ~~and~~including ~~5) Recognize revenue when~~ (~~or as~~1) ~~performance obligations~~subject ~~are~~to ~~satisfied.~~certain ~~Our~~exceptions, ~~preliminary conclusion is that~~ the ~~determination~~accuracy of ~~what~~the ~~constitutes~~representations aand ~~contract~~warranties ~~with~~of ~~our~~the ~~customers~~other ~~(step~~party, 1(2), ~~our~~ performance ~~obligations~~in ~~under~~all ~~the~~material ~~contract~~respects ~~(step~~by ~~2),~~the ~~and~~other ~~the~~party ~~determination~~of ~~and~~its ~~allocation~~obligations ofunder the ~~transaction~~Merger ~~price (steps~~Agreement, (3 ~~and 4~~) ~~and~~the ~~recognizing~~absence of ~~revenue~~a ~~when~~material ~~performance~~adverse ~~obligations~~effect ~~are~~with ~~satisfied~~respect ~~(step~~to ~~5) under~~ the ~~new~~other ~~revenue~~party ~~recognition~~and ~~model will~~(4) ~~not~~receipt ~~result~~by insuch ~~material~~party ~~changes~~of ina ~~comparison~~tax opinion to ~~our~~the ~~current~~effect ~~revenue~~that the ~~recognition~~Merger ~~for~~will ~~our~~qualify ~~contracts~~as ~~with~~a ~~customers~~reorganization ~~entered~~within ~~into in~~ the ~~normal~~meaning ~~course~~ of ~~operations.~~Section ~~However,~~368(a) weof ~~have~~the ~~not~~Internal ~~yet~~Revenue ~~finalized~~Code ~~our~~of ~~analysis~~1986.

NUMEREX CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED ~~NOTES TO~~ CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2017

~~Effective~~The ~~January~~Merger 1,Agreement ~~2017,~~also ~~the~~provides ~~Company~~certain ~~adopted~~termination ~~guidance~~rights ~~which simplifies~~for each of the ~~measurement~~Company ofand ~~inventory.~~Sierra ~~The~~and ~~guidance~~further ~~changed~~provides ~~the~~that ~~measurement~~a ~~principle~~termination ~~for~~fee ~~inventory~~equal ~~from~~to 3.75% of the ~~lower~~aggregate equity value of ~~cost~~the Merger oras ~~market~~of ~~to lower~~the date of ~~cost~~the ~~and~~Merger ~~net~~Agreement ~~realizable~~will ~~value~~be ~~and~~payable ~~eliminates~~by the ~~requirement~~Company toupon ~~consider~~termination ~~replacement~~of ~~cost~~the orMerger ~~net~~Agreement ~~realizable~~under ~~value less~~certain ancircumstances ~~approximately~~specified ~~normal~~in ~~profit~~the ~~margin~~Merger ~~when~~Agreement. ~~measuring~~In ~~inventory.~~addition, ~~The~~upon ~~provisions~~termination of ~~this~~the ~~standard~~Merger ~~were~~Agreement ~~adopted~~by onSierra as a ~~prospective~~result ~~basis~~of either Numerex’s shareholders not approving the transaction or Numerex’s fraud or willful and ~~adoption~~material breach of ~~this~~a representation, ~~standard~~warranty ~~did~~or ~~not~~covenant, ~~have~~Numerex anmay ~~impact~~be onrequired to reimburse Sierra for its out-of-pocket costs and expenses incurred in connection with the ~~Company's~~Merger ~~financial~~in ~~position~~an amount not to exceed $850,000 ~~results~~in the event of ~~operations~~a no vote and $2 million in the event of fraud or ~~cash~~a ~~flows~~willful and material breach.

In ~~July~~connection ~~2017~~with entering into the Merger Agreement, the Company agreed ~~adopted~~to ~~guidance~~repurchase ~~which~~the ~~changes~~Hale ~~the~~Capital ~~classification analysis~~warrants for a purchase price of ~~certain~~$4.0 ~~equity-linked~~million, ~~instruments~~immediately ~~with~~prior ~~down~~to, ~~round~~and ~~features.~~contingent ~~The~~upon, the ~~guidance~~consummation ~~changed~~of the ~~requirement~~Merger. ~~that~~In aaddition, ~~down~~Hale ~~round feature~~Capital ~~precluded~~has ~~equity~~agreed ~~classification~~to ~~when~~waive ~~assessing~~any ~~whether~~event of default under the ~~instrument~~Note isPurchase ~~indexed~~Agreement that tomay anbe ~~entity’s~~caused ~~own~~by ~~stock.~~the ~~The~~execution ~~provisions~~ of ~~this~~the ~~standard~~Merger ~~were~~Agreement ~~early~~or ~~adopted~~the asconsummation of ~~June~~the ~~30,~~Merger; ~~2017.~~provided Asthat of(i) ~~June~~the ~~30,~~repurchase price ~~2017,~~for the ~~only~~warrant ~~equity~~and ~~linked~~all ~~instruments~~principal, ~~with~~interest ~~down-round features~~and ~~for~~other ~~the~~amounts ~~Company~~owed ~~were~~under the ~~warrants~~Notes ~~issued~~are paid in ~~connection~~full substantially concurrently with the ~~Note Purchase~~Effective ~~Agreement~~Time ~~(see~~of ~~Note~~the F-Merger ~~Debt~~and (ii) the Effective Time of the Merger occurs on or before August 1, 2018.

NOTE K -– ~~SUBSEQUENT~~RECENT ~~EVENTS~~ACCOUNTING PRONOUNCEMENTS

OnIn ~~August~~January 2, 2017, the ~~Company~~Financial ~~entered~~Accounting ~~into~~Standards anBoard ~~Agreement and~~(FASB) issued ~~Plan~~guidance ofsimplifying ~~Merger (~~the ~~“Merger~~test ~~Agreement”)~~for ~~with~~goodwill ~~Sierra~~impairment. ~~Wireless,~~The ~~Inc.,~~guidance aeliminates ~~Canadian~~step ~~corporation~~two ~~(“Sierra”),~~ from the goodwill impairment test and ~~Wireless~~instead requires ~~Acquisition~~an ~~Sub~~entity to perform its annual, ~~Inc.~~or interim, agoodwill ~~Delaware~~impairment ~~corporation~~test ~~and~~by acomparing ~~direct,~~the ~~wholly-owned~~fair ~~subsidiary~~value of ~~Sierra~~a ~~(“Merger~~reporting ~~Sub”).~~unit with its carrying amount. The ~~Merger~~entity ~~Agreement~~should ~~provides~~recognize ~~that,~~an ~~subject~~impairment tocharge for the ~~terms~~amount ~~and~~by ~~conditions~~which ~~set~~the ~~forth~~carrying ~~therein,~~amount ~~Merger~~exceeds the ~~Sub~~reporting ~~will~~unit’s ~~merge~~fair ~~with~~value, ~~and~~not ~~into~~ to exceed the ~~Company,~~total ~~with~~amount of goodwill allocated to the ~~Company~~reporting ~~surviving~~unit. asThe updated guidance requires a ~~wholly-owned~~prospective ~~subsidiary~~adoption, ofwith ~~Sierra~~early ~~(the~~adoption ~~“Merger”)~~permitted. The ~~Merger~~guidance ~~Agreement was~~is ~~unanimously~~effective ~~approved~~for ~~and~~the ~~adopted~~Company bybeginning in 2020. The Company is in the ~~board~~process of ~~directors~~evaluating ofthe ~~each~~effects of the ~~Company~~provisions ~~and~~of ~~Sierra~~this guidance on our financial statements.

~~Subject~~In toJanuary ~~the terms and conditions of the Merger Agreement~~2017, at the ~~effective~~FASB ~~time~~issued ofguidance ~~the~~to ~~Merger~~assist ~~(the~~entities ~~“Effective Time”), the Company’s shareholders will have the right to~~in ~~receive~~evaluating ~~0.1800~~whether ~~common~~transactions ~~shares,~~should nobe ~~par~~accounted ~~value,~~for ofas ~~Sierra~~acquisitions (~~“Sierra~~or ~~Common Stock”~~disposals) ~~for~~of ~~each~~assets ~~share~~or ofbusinesses. ~~Class~~The Aupdated ~~common stock,~~guidance norequires ~~par~~a ~~value,~~prospective ofadoption. ~~the~~Early ~~Company~~adoption ~~(“Company~~is ~~Common Stock”) (such consideration, the “Merger Consideration”)~~permitted. ~~Additionally,~~ ~~each~~This ~~outstanding~~update ~~restricted stock unit, in-the-money option and in-the-money stock appreciation right~~ will be ~~cancelled in~~effective ~~exchange~~ for the ~~right~~Company tobeginning ~~receive the Merger Consideration~~ in ~~accordance with the terms of the Merger Agreement~~2018. ~~Except as~~ ~~described~~The ~~below~~Company ~~and~~does ~~specified~~not inexpect the ~~Merger~~provisions ~~Agreement, if exercised following notice~~ of ~~the~~this ~~Merger,~~guidance ~~each outstanding warrant issued by the Company will be cancelled in exchange for the right~~ to ~~receive~~have ~~the~~a ~~Merger~~material ~~Consideration~~impact ~~or,~~on ifour ~~not~~financial ~~exercised, will be cancelled at the Effective Time~~statements.

~~The~~In ~~Merger Agreement contains customary representations and~~November ~~warranties~~2016, ~~from each of~~ the ~~Company~~FASB ~~and~~issued ~~Sierra,~~guidance ~~and~~impacting ~~each~~restricted ~~party~~cash topresentation on the ~~Merger~~statement ~~Agreement~~of ~~has~~cash ~~agreed~~flows. toThe ~~customary~~guidance ~~covenants,~~requires ~~including,~~that ~~among~~a ~~others,~~statement ~~covenants~~of ~~relating~~cash toflows ~~(1)~~explain the ~~conduct~~change ~~of the Company’s and Sierra’s businesses~~ during the ~~interim~~ period ~~between~~ ~~the execution~~ of ~~the~~cash, ~~Merger~~cash ~~Agreement~~equivalents, and ~~the~~amounts ~~Effective~~generally ~~Time,~~described ~~(2)~~as ~~the~~restricted cash ~~obligation~~or ofrestricted ~~the~~cash ~~Company~~equivalents. toAmounts ~~call~~generally adescribed ~~meeting~~as ofrestricted ~~its shareholders~~cash toand ~~adopt~~restricted ~~the~~cash ~~Merger~~equivalents ~~Agreement,~~should ~~and,~~be ~~subject~~included with tocash ~~certain~~and ~~exceptions,~~cash toequivalents ~~recommend~~when ~~that~~reconciling ~~its shareholders adopt~~ the ~~Merger Agreement~~beginning-of-period and ~~(3)~~end-of-period ~~the~~total ~~Company’s~~amounts ~~non-solicitation~~shown ~~obligations~~on ~~relating~~the tostatement of ~~alternative~~cash ~~acquisition proposals~~flows. ~~Each~~This ofstandard ~~the Company~~becomes ~~and~~effective ~~Sierra~~for ~~has~~the ~~also~~Company ~~agreed~~during tothe ~~apply~~first ~~for,~~quarter orof ~~otherwise~~2018 ~~seek,~~ and ~~use~~will ~~its~~be ~~respective~~applied ~~commercially~~using ~~reasonable~~a ~~efforts to~~retrospective ~~obtain,~~approach ~~all~~for ~~consents~~each ~~and~~period ~~approvals~~presented. ofThe ~~governmental~~Company ~~entities~~does ~~required~~not toexpect bethe ~~obtained~~provisions byof itthis ~~for~~guidance ~~the~~to ~~consummation~~have ofa ~~the~~material ~~transactions~~impact ~~contemplated~~on byour ~~the~~financial ~~Merger Agreement~~statements.

~~The~~In ~~completion of the Merger is subject to customary conditions~~February 2016, ~~including~~ ~~(1)~~ the ~~adoption of the Merger Agreement by the Company’s shareholders, (2) the receipt of conditional approval of the shares of Sierra Common Stock to be~~ FASB issued inguidance ~~the Merger for listing on the Toronto Stock Exchange, subject only~~ that requires lessees to ~~customary~~ ~~post-closing~~recognize ~~deliverables,~~most ~~and~~leases on The NASDAQ Global Market, subject only to official notice of issuance, (3) the expiration or early termination of all applicable waiting periods applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as ~~amended,~~assets ~~(4)~~and ~~the~~liabilities ~~effectiveness~~on of the ~~registration~~balance ~~statement~~sheet. onQualitative ~~Form F-4 by the Securities~~ and ~~Exchange Commission~~quantitative ~~for~~disclosures ~~the~~will ~~Sierra~~be ~~Common Stock~~ enhanced to bebetter ~~issued~~understand in the ~~Merger~~amount, ~~(5)~~timing ~~the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal~~ and ~~(6)~~uncertainty ~~the absence~~ of ~~any~~cash ~~pending~~flows ~~legal proceeding~~arising ~~instituted~~from ~~by any governmental entity seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by the Merger Agreement~~leases. ~~Each~~The ~~party’s~~guidance ~~obligation to complete the Merger~~ is ~~also~~effective ~~subject~~for ~~to certain additional~~annual ~~customary conditions, including (1) subject to certain exceptions, the accuracy of the representations~~ and ~~warranties~~interim ofperiods ~~the~~beginning ~~other party,~~after ~~(2)~~December ~~performance in all material respects by the other party of its obligations under the Merger Agreement~~15, ~~(3)~~2018. ~~the~~The ~~absence of~~updated standard mandates a ~~material~~modified ~~adverse~~retrospective ~~effect~~transition method with ~~respect~~early toadoption ~~the~~permitted. We ~~other~~are currently ~~party~~evaluating ~~and (4) receipt by such party of a tax opinion to~~ the effect that ~~the~~ ~~Merger will qualify as a reorganization within~~ the ~~meaning~~updated ofstandard ~~Section~~will ~~368(a)~~have ~~of the Internal Revenue Code of 1986~~on our financial statements.

The Merger Agreement also provides certain termination rights for each of the Company and Sierra and further provides that a termination fee equal to 3.75% of the aggregate equity value of the Merger as of the date of the Merger Agreement will be payable by the Company upon termination of the Merger Agreement under certain circumstances specified in the Merger Agreement. In addition, upon termination of the Merger Agreement by Sierra as a result of either Numerex’s shareholders not approving the transaction or Numerex’s fraud or willful and material breach of a representation, warranty or covenant, Numerex may be required to reimburse Sierra for its out-of-pocket costs and expenses incurred in connection with the Merger in an amount not to exceed $850,000 in the event of a no vote and $2 million in the event of fraud or a willful and material breach.16

InNUMEREX ~~connection with entering into the Merger Agreement, the Company agreed to repurchase the Hale Capital warrants for a purchase price of $4~~CORP.0 ~~million,~~AND immediately prior to, and contingent upon, the consummation of the Merger. In addition, Hale Capital has agreed to waive any event of default under the Note Purchase Agreement that may be caused by the execution of the Merger Agreement or the consummation of the Merger; provided that (i) the repurchase price for the warrant and all principal, interest and other amounts owed under the Notes are paid in full substantially concurrently with the Effective Time of the Merger and (ii) the Effective Time of the Merger occurs on or before August 1, 2018.SUBSIDIARIES

16UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Item~~September 2.30, ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~2017

~~Forward~~In ~~Looking~~May ~~Statements~~2014, the FASB issued guidance which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued additional guidance which delays the effective date by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued guidance which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. We currently anticipate adopting the new standard effective January 1, 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We currently anticipate adopting the standard using the modified retrospective method. We are continuing to work towards establishing policies, updating our processes and implementing necessary changes to data and processes to be able to comply with the new requirements. Based on the results of our assessment to date, we do not expect that the new standard will result in significant changes in our units of accounting or the amounts of revenue allocated between units of accounting. Further, our initial evaluation is that monthly recurring service revenue for security, network, and asset identification and optimization, which is the majority of our revenue, would not be materially impacted by the adoption of this standard. Our initial conclusion may change when we complete our evaluation which is proceeding as planned. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to additional disclosures related to qualitative and quantitative information concerning the nature, amount, timing, and any uncertainty of revenue and cash flows from contracts with customers.

~~This~~Effective ~~document~~January ~~contains~~1, ~~and other statements may contain~~2017, ~~forward-looking statements~~the ~~with~~Company ~~respect~~adopted toguidance ~~Numerex~~which ~~future financial or business performance, conditions or strategies and other financial and business~~simplifies ~~matters,~~the ~~including~~measurement ~~expectations~~of ~~regarding growth trends and activities~~inventory. ~~Forward-looking~~The ~~statements~~guidance ~~are~~changed ~~typically~~the ~~identified~~measurement ~~by words~~principle orfor ~~phrases~~inventory ~~such~~from asthe ~~"believe,"~~lower ~~"expect,"~~of ~~"anticipate,"~~cost ~~"intend,"~~or ~~"estimate," "assume,"~~market ~~"strategy," "plan," "outlook," "outcome," "continue," "remain,"~~to ~~"trend,"~~lower ~~and variations~~ of ~~such~~cost ~~words~~ and ~~similar~~net ~~expressions,~~realizable orvalue ~~future~~and oreliminates ~~conditional~~the ~~verbs~~requirement ~~such~~to asconsider ~~"will," "would,"~~replacement ~~"should,"~~cost ~~"could," "may,"~~ or ~~similar~~net ~~expressions.~~realizable ~~Numerex~~value ~~cautions that these~~less ~~forward-looking~~an ~~statements~~approximately ~~are~~normal ~~subject~~profit tomargin ~~numerous~~when ~~assumptions,~~measuring ~~risks and uncertainties, which change over time~~inventory. ~~These~~The ~~forward-looking statements~~provisions ~~speak only as~~ of ~~the date of~~ this ~~filing,~~standard ~~and~~were ~~Numerex~~adopted ~~assumes~~on noa ~~duty~~prospective tobasis and ~~update~~adoption ~~forward-looking~~of ~~statements.~~this ~~Actual~~standard ~~results could~~did ~~differ~~not ~~materially~~have ~~from~~an ~~those~~impact ~~anticipated~~on inthe ~~these~~Company's ~~forward-looking~~financial ~~statements~~position, ~~and future~~ results ~~could~~of ~~differ~~operations ~~materially~~or ~~from historical~~cash ~~performance~~flows.

~~The~~In ~~following~~July ~~factors~~2017, ~~among~~the ~~others,~~Company ~~could~~adopted ~~cause~~guidance ~~actual~~which ~~results to~~changes ~~differ~~the ~~materially~~classification analysis ~~from~~of ~~forward~~certain equity-~~looking~~linked ~~statements~~instruments orwith ~~historical~~down ~~performance:~~round ~~our~~features. ~~inability~~The toguidance ~~reposition~~changed ~~our platform to capture greater recurring subscription revenues;~~ the ~~risks~~requirement that a ~~substantial~~down ~~portion~~round feature ofprecluded ~~revenues~~equity ~~derived~~classification ~~from~~when ~~contracts~~assessing ~~may~~whether ~~be terminated at any time;~~ the ~~risks~~instrument ~~that~~is ~~our~~indexed ~~strategic~~to ~~suppliers~~an ~~materially~~entity’s ~~change~~own orstock. ~~disrupt~~The ~~the flow~~ provisions of ~~products~~this orstandard ~~services;~~were ~~variations~~early ~~in quarterly~~adopted ~~operating~~as ~~results;~~of ~~delays~~June ~~in the development~~30, ~~introduction,~~2017. ~~integration~~As ~~and marketing~~ of ~~new~~September ~~products~~30, ~~and~~2017, ~~services; customer acceptance of services; economic conditions resulting in decreased demand for our products and services;~~ the ~~risk~~only ~~that~~equity ~~our~~linked ~~strategic alliances,~~instruments ~~partnerships~~with ~~and/or wireless network operators will not yield substantial revenues; changes in financial and capital~~down-round ~~markets,~~features ~~and~~for the ~~inability~~Company towere ~~raise growth capital;~~ the ~~inability~~warrants toissued ~~attain revenue and earnings growth; changes~~ in ~~interest~~connection ~~rates; inflation;~~with the ~~introduction,~~Hale ~~withdrawal,~~Financing ~~success~~(see ~~and~~Note ~~timing~~F- 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 changesDebt).

~~Overview~~NOTE L – SUBSEQUENT EVENTS

AsOn ~~used~~October ~~herein~~4, ~~except~~2017, asa ~~otherwise~~putative ~~indicated~~class byaction ~~context,~~was ~~references~~filed against the toCompany ~~“we~~and certain of its directors and officers in the United States District Court for the Northern District of Georgia. This suit is captioned Litwin v. Numerex Corp. et al. This lawsuit alleges on behalf of a putative class of investors that the Company and other defendants violated various provisions of the securities laws in conjunction with the public disclosures concerning the Company’s merger with Sierra Wireless,” ~~“us~~Inc. On October 9,” ~~“our~~2017,” ora ~~“Numerex”~~second ~~refers~~suit towas filed in the same court raising substantially similar allegations under the captions Franchi v. Numerex Corp. et al. Neither Complaint seeks a specified amount of damages. The Company believes it has meritorious defenses to the allegations in the complaints and ~~subsidiaries~~intends to defend the litigation vigorously. The Company presently intends to file a motion to dismiss. The Company has certain insurance with respect to these claims, and it has notified its carriers regarding these matters.

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 June 30, 2017.17

~~Numerex~~Item ~~Corp~~2. ~~(“Numerex,”~~Management’s ~~the~~Discussion ~~“Company” or “we”) is headquartered in Atlanta, Georgia,~~ and isAnalysis ~~a corporation organized under the laws~~ of ~~the~~Financial ~~Commonwealth~~Condition ~~of Pennsylvania.~~and WeResults ~~are a single source, leading provider~~ of ~~managed enterprise solutions enabling the Internet of Things (IoT)~~Operations. ~~We empower enterprise operations with world-class, managed IoT solutions that are simple, innovative, scalable and secure.~~

~~During~~Forward ~~the~~Looking quarter ended June 30, 2017, we had revenues of $14.0 million, and a net loss of $3.1 million; compared with revenues and a net loss of $17.6 million and $8.3 million, respectively for the quarter ended June 30, 2016.Statements

~~Our~~This ~~core~~document ~~strategy~~contains, isand other statements may contain, forward-looking statements with respect to ~~generate~~Numerex ~~long~~future ~~term~~financial or business performance, conditions or strategies and ~~sustainable~~other ~~recurring~~financial and business ~~revenue~~matters, ~~through~~including aexpectations ~~portfolio~~regarding ofgrowth ~~managed,~~trends ~~end-to-end~~and ~~IoT~~activities. ~~solutions~~Forward-looking ~~which~~statements are ~~generally~~typically ~~sold~~identified onby words aor ~~subscription~~phrases ~~basis~~such ~~and~~as ~~built~~"believe," on"expect," "anticipate," "intend," "estimate," ~~our~~"assume," ~~horizontal~~"strategy," ~~integrated~~"plan," ~~platform.~~"outlook," ~~Our~~"outcome," ~~solutions~~"continue," ~~incorporate~~"remain," "trend," ~~the~~and ~~key~~variations ~~IoT~~of ~~building~~such ~~blocks~~words –and ~~Device~~similar expressions, ~~Network~~or future or conditional verbs such as "will," "would," ~~Application~~"should," "could," "may," or similar expressions. Numerex cautions that these forward-looking statements are subject to numerous assumptions, risks and ~~Platform~~uncertainties, which change over time. ~~Our~~These ~~solutions~~forward-looking statements ~~also~~speak ~~simplify~~only as of the ~~implementation~~date of this filing, and ~~improve~~Numerex ~~the~~assumes ~~speed~~no duty to ~~market~~update ~~for~~forward-looking ~~enterprise~~statements. ~~users~~Actual inresults could ~~select,~~differ ~~targeted verticals~~materially from those anticipated in ~~the~~these ~~asset~~forward-looking ~~monitoring~~statements and ~~optimization,~~future ~~asset~~results ~~tracking,~~could ~~and~~differ ~~safety~~materially ~~and~~from historical ~~security markets~~performance.

~~Our~~The ~~strategy~~following ~~requires~~factors, ~~significant~~among ~~capital~~others, ~~investment~~could cause actual results to ~~develop~~differ materially from forward-looking statements or historical performance: our inability to reposition our platform to capture ~~and~~greater ~~enhance~~recurring subscription revenues; the risks that a substantial portion of revenues derived from contracts may be terminated at any time; the risks that our ~~use~~strategic suppliers materially change or disrupt the flow of ~~technology~~products or services; variations in quarterly operating results; delays in the development, introduction, integration and tomarketing ~~maintain~~of new products and services; customer acceptance of services; economic conditions resulting in decreased demand for our ~~leadership~~products ~~position~~and services; the risk that our strategic alliances, partnerships and/or ~~competitive~~wireless ~~advantage~~network operators will not yield substantial revenues; changes in ~~the~~financial and capital markets, weand ~~serve~~the inability to raise growth capital; 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.

17Overview

~~Subscription~~As ~~and~~used ~~support~~herein, ~~revenue~~except ~~is recognized monthly~~ as ~~services are~~otherwise ~~provided~~indicated ~~and~~by ~~sales~~context, ofreferences to ~~embedded~~“we,” ~~devices~~“us,” ~~and~~“our,” ~~hardware~~or ~~are~~“Numerex” ~~recognized~~refers ~~when~~to ~~title~~Numerex ~~passes~~Corp. ~~Other upfront payment revenue is deferred~~ and ~~amortized on a straight line basis~~subsidiaries.

~~Due~~The tofollowing ~~fluctuations~~Management’s ofDiscussion and Analysis is intended to help the ~~commencement~~reader understand our results of ~~new~~operations ~~contracts~~and financial condition. This discussion and ~~renewal of~~analysis ~~existing~~is ~~contracts,~~provided weas ~~expect~~a supplement ~~variability~~to, ofand ~~sequential~~should ~~quarterly~~be ~~trends~~read in ~~revenues~~conjunction with, ~~margins~~our ~~and~~unaudited ~~cash~~condensed ~~flows.~~consolidated ~~Other~~financial ~~factors contributing~~statements toand ~~sequential~~the ~~quarterly~~accompanying notes ~~trends~~included ~~include~~in ~~usage,~~this ~~rate~~Quarterly ~~changes,~~Report ~~and~~on reForm 10-~~pricing~~Q offor ~~contract~~the ~~renewals~~period ~~and~~ended ~~technology~~September ~~changes~~30, 2017.

~~Historically~~Numerex Corp. (“Numerex,” ~~our~~the ~~revenues~~“Company” or ~~and~~“we”) ~~expenses~~is headquartered in Atlanta, Georgia, and is a corporation organized under the ~~first~~laws ~~quarter~~of ~~have~~the Commonwealth of ~~been~~Pennsylvania. ~~modestly~~We ~~affected~~are bya ~~slowing~~single source, leading provider of ~~customer~~managed ~~purchase~~enterprise ~~activities~~solutions ~~during~~enabling the ~~holidays~~Internet of Things (IoT). We empower Asenterprise aoperations ~~result~~with world-class, ~~historical~~managed ~~quarterly~~IoT ~~fluctuations may~~solutions ~~not~~that beare ~~indicative~~simple, ofinnovative, ~~future~~scalable ~~operating~~and ~~results~~secure.

AsDuring ~~part~~the ofquarter ~~our~~ended ~~effort~~September to30, ~~build and enhance our core business~~2017, we ~~conduct~~ ~~ongoing~~had ~~business~~revenues ~~strategy reviews~~of $15.3 ~~During our reviews~~million, ~~we consider opportunities for growth in existing~~ and ~~new~~a ~~markets that~~net ~~may~~loss ~~involve~~of ~~growth derived from both existing operations as well as from future acquisitions, if any~~$3.4 Tomillion; ~~the~~compared ~~extent~~with ~~existing business~~revenues ~~lines~~ and ~~service~~a ~~offerings~~net ~~are~~loss ~~not considered to be compatible with delivery~~ of ~~our~~$17.4 ~~core~~million ~~business~~and ~~services~~$2.5 ormillion, ~~with meeting~~respectively ~~our~~for ~~financial~~the ~~objectives,~~quarter weended ~~may~~September ~~exit~~30, ~~non-core lines of business or stop offering these services in part or in whole~~2016.

~~Results~~Our core strategy is to generate long term and sustainable recurring revenue through a portfolio of ~~Operations~~managed, end-to-end IoT solutions which are generally sold on a subscription basis and built on our horizontal, integrated platform. Our solutions incorporate the key IoT building blocks – Device, Network, Application and Platform. Our solutions also simplify the implementation and improve the speed to market for enterprise users in select, targeted verticals in the asset monitoring and optimization, asset tracking, and safety and security markets.

~~Three~~Our ~~Months~~strategy ~~Ended~~requires ~~June~~significant ~~30,~~capital ~~2017~~investment to develop and ~~2016~~enhance our use of technology and to maintain our leadership position and competitive advantage in the markets we serve.

~~The following table sets forth selected consolidated results of operations for the periods indicated, including comparative information between the periods (dollars in thousands):~~18

	Three Months Ended June 30,										Change from
	2017					2016					2016 to 2017
Net revenues:
Subscription and support revenues	$	12,680		90.7	%	$	14,810		84.1	%	$	(2,130	)	-14.4	%
Embedded devices and hardware		1,300		9.3	%		2,796		15.9	%		(1,496	)	-53.5	%
Total net revenues		13,980		100.0	%		17,606		100.0	%		(3,626	)	-20.6	%
Cost of sales
Subscription and support revenues		5,364		38.4	%		5,713		32.4	%		(349	)	-6.1	%
Embedded devices and hardware		1,312		9.4	%		3,314		18.8	%		(2,002	)	-60.4	%
Gross profit		7,304		52.2	%		8,579		48.7	%		(1,275	)	-14.9	%
Operating expenses:
Sales and marketing		2,693		19.3	%		3,270		18.6	%		(577	)	-17.6	%
General and administrative		2,431		17.4	%		3,859		21.9	%		(1,428	)	-37.0	%
Engineering and development		1,704		12.2	%		2,444		13.9	%		(740	)	-30.3	%
Depreciation and amortization		1,443		10.3	%		1,677		9.5	%		(234	)	-14.0	%
Impairment of goodwill and other
other intangible assets		-		0.0	%		4,172		23.7	%		(4,172	)	-100.0	%
Restructuring charges		355		2.5	%		1,243		7.1	%		(888	)	-71.4	%
Operating loss		(1,322	)	-9.5	%		(8,086	)	-45.9	%		6,764		-83.7	%
Interest expense		742		5.3	%		460		2.6	%		282		61.3	%
Loss on extinguishment of debt		861		6.2	%		-		0.0	%		861		100.0	%
Other income (expense), net		70		0.5	%		(22	)	-0.1	%		92		-418.2	%
Loss before income taxes		(2,995	)	-21.4	%		(8,524	)	-48.4	%		5,529		-64.9	%
Income tax expense (benefit)		81		0.6	%		(234	)	-1.3	%		315		-134.6	%
Net loss	$	(3,076	)	-22.0	%	$	(8,290	)	-47.1	%	$	5,214		-62.9	%
Adjusted EBITDA(1)	$	1,403		10.0	%	$	627		3.6	%	$	776		123.7	%

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.

~~(1)~~Due –to ~~Adjusted~~fluctuations ~~EBITDA~~of isthe ~~not~~commencement aof ~~financial~~new ~~measure~~contracts ~~prepared~~and renewal inof ~~accordance~~existing ~~with~~contracts, ~~accounting~~we ~~principles~~expect ~~generally~~variability ~~accepted~~of insequential ~~the~~quarterly ~~United~~trends ~~States~~in ofrevenues, ~~America~~margins ~~(GAAP).~~and ~~See~~cash ~~further~~flows. ~~discussion,~~Other ~~including~~factors ~~reconciliation~~contributing to ~~the~~sequential ~~most~~quarterly ~~comparable~~trends ~~GAAP~~include ~~measure~~usage, ~~under~~rate ~~the~~changes, ~~caption~~and ~~Non~~re-~~GAAP~~pricing ~~Financial~~of ~~Measures~~contract ~~below~~renewals and technology changes.

18Historically, 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.

~~Total~~As ~~revenue~~part ~~decreased~~of ~~$3.6~~our ~~million~~effort to build and enhance our core business, orwe conduct 20ongoing business strategy reviews.6% During our reviews, we consider opportunities for ~~the~~growth ~~three~~in ~~months ended~~existing ~~June~~and ~~30,~~new ~~2017~~markets that tomay ~~$14.0~~involve ~~million~~growth derived from ~~$17.6~~both ~~million~~existing ~~for~~operations ~~the~~as ~~same~~well ~~period~~as infrom ~~2016~~future acquisitions, if any. ~~The~~To ~~decrease~~the inextent ~~total~~existing business ~~revenue~~lines isand ~~related~~service offerings are not considered to ~~the~~ ~~decrease~~be incompatible ~~subscription~~with ~~and~~delivery ~~support~~of ~~revenue~~our ascore ~~well~~business asservices ~~embedded~~or ~~devices~~with ~~and~~meeting our ~~hardware~~financial ~~revenue~~objectives, ~~which~~we ismay ~~discussed~~exit ~~below~~non-core lines of business or stop offering these services in part or in whole.

~~Subscription~~Results and support revenues decreased $2.1million, or 14.4%, to $12.7 million from $14.8 million in 2016. The decrease is driven by 2G disconnects associated with the AT&T 2G network sunset that occurred on December 31, 2016. Embedded devices and hardware revenue decreased $1.5 million, or 53.5%, to $1.3 million from $2.8 million in 2016. The decrease in revenue is driven by customer’s replacement of ~~their 2G products in 2016 in anticipation of the AT&T 2G network sunset that occurred on December 31, 2016.~~ Operations

~~Total~~Three ~~cost~~Months ofEnded ~~sales~~September ~~for the three months ended June~~ 30, ~~2017~~ decreased $2.4 million, or 26.0%, to $6.7 million compared to $9.0 million for the same period in 2016. Comprising that decrease, the cost of sales for subscription and support services decreased $0.3 million, or 6.12%, to $5.4 million for the three months ended June 30, 2017 ~~compared to $5.7 million for the same period in 2016. Cost of sales for embedded devices~~ and ~~hardware~~ ~~decreased $2.0 million, or 60.4% to $1.3 million for the three months ended June 30, 2017 compared to $3.3 million for the same period in~~ 2016.

~~Total~~The ~~gross~~following ~~profit~~table ~~for~~sets ~~the~~forth ~~period~~selected ~~ended~~consolidated ~~June~~results ~~30, 2017 decreased~~of ~~$1.3~~operations ~~million, or 14.9% to $7.3 million compared to $8.6 million~~ for the ~~same~~periods ~~period in 2016 for the reasons stated above. Gross profit margin percentage increased to 52.2% for the three months ended June 30~~indicated, ~~2017~~including ~~from~~comparative ~~48.7%~~information ~~for~~between the ~~same~~periods ~~period~~(dollars in ~~2016. The increase in gross margin was driven primarily by a reduction in carrier fees and the sale of fully reserved inventory during the three months ended June 30, 2017.~~thousands):

Sales and marketing expense decreased $0.6 million, or 17.6%, for the three months ended June 30, 2017 to $2.7 million compared to $3.3 million for the same period in 2016. The decrease is primarily attributable to a decline in promotional activities during the quarter and reduced travel costs.

	Three Months Ended September 30,										Change from
	2017					2016					2016 to 2017
Net revenues:
Subscription and support revenues	$	11,983		78.3	%	$	14,388		82.6	%	$	(2,405	)	-16.7	%
Embedded devices and hardware		3,320		21.7	%		3,024		17.4	%		296		9.8	%
Total net revenues		15,303		100.0	%		17,412		100.0	%		(2,109	)	-12.1	%
Cost of sales
Subscription and support revenues		5,087		33.2	%		5,828		33.5	%		(741	)	-12.7	%
Embedded devices and hardware		3,458		22.6	%		3,082		17.7	%		376		12.2	%
Inventory reserves		1,301		8.5	%		27		0.2	%		1,274		4718.5	%
Gross profit		5,457		35.7	%		8,475		48.7	%		(3,018	)	-35.6	%
Operating expenses:
Sales and marketing		2,183		14.3	%		3,229		18.5	%		(1,046	)	-32.4	%
General and administrative		2,314		15.1	%		3,280		18.8	%		(966	)	-29.5	%
Engineering and development		1,341		8.8	%		2,229		12.8	%		(888	)	-39.8	%
Depreciation and amortization		1,426		9.3	%		1,658		9.5	%		(232	)	-14.0	%
Restructuring charges		655		4.3	%		276		1.6	%		379		137.3	%
Operating loss		(2,462	)	-16.1	%		(2,197	)	-12.6	%		(265	)	12.1	%
Interest expense		919		6.0	%		469		2.7	%		450		95.9	%
Other income, net		(34	)	-0.2	%		(33	)	-0.2	%		(1	)	3.0	%
Loss before income taxes		(3,347	)	-21.9	%		(2,633	)	-15.1	%		(714	)	27.1	%
Income tax expense (benefit)		79		0.5	%		(87	)	-0.5	%		166		-190.8	%
Net loss	$	(3,426	)	-22.4	%	$	(2,546	)	-14.6	%	$	(880	)	34.6	%
Adjusted EBITDA⁽¹⁾	$	1,716		11.2	%	$	859		4.9	%	$	857		99.7	%

~~General and administrative expense decreased $~~(1.4) ~~million,~~– orAdjusted ~~37.1%, to~~EBITDA ~~$2.4~~is ~~million~~not ~~for~~a ~~the~~financial ~~three~~measure ~~months~~prepared in ~~ended~~accordance ~~June~~with ~~30,~~accounting ~~2017,~~principles ~~compared~~generally toaccepted ~~$3.9~~in ~~million for~~ the ~~same~~United ~~period~~States inof ~~2016~~America (GAAP). ~~The~~See ~~decrease~~further isdiscussion, including ~~driven~~reconciliation ~~primarily~~to bythe ~~reduced~~most ~~general~~comparable ~~and~~GAAP ~~administrative~~measure, ~~salary~~under ~~cost~~the ~~resulting~~caption ~~from~~Non-GAAP aFinancial ~~reduction~~Measures ~~in headcount and lower travel costs~~below.

Engineering and development expenses decreased $0.7 million, or 30.3% to $1.7 million for the three months ended June 30, 2017, compared to $2.4 million for the same period in 2016. The decrease is primarily related to reduced headcount in engineering and development, and lower travel costs.19

~~Depreciation~~Total ~~and~~revenue ~~amortization expense~~ decreased $0.2.1 million, or 14 12.01%, ~~to $1.4 million~~ for the three months ended ~~June~~September 30, 2017, ~~compared~~ to $115.73 million from $17.4 million for the same period in 2016. The decrease in total revenue is related to the decrease in subscription and support revenue as well as embedded devices and hardware revenue, which is discussed below.

~~Restructuring~~Subscription ~~charges~~and ~~were~~support revenues decreased $02.4 million ~~for the three months ended June 30~~, ~~2017,~~or ~~compared~~ 16.7%, to $112.20 million ~~for~~from ~~the~~$14.4 ~~same~~million ~~period~~ in 2016. The decrease is ~~due~~driven toby 2G disconnects associated with the AT&T 2G network sunset that occurred on December 31, 2016. Embedded devices and hardware revenue increased $0.3 million, or 9.8%, to $3.3 million from $3.0 million in ~~facility~~2016. ~~charges~~The ~~recorded~~ increase in ~~June~~embedded ~~2016~~devices ~~related~~and hardware revenue is due to ~~the~~an ~~relocation~~increase ofin ~~our~~sales ~~corporate~~volume ~~headquarters~~and product mix.

~~Loss~~Total oncost of sales for the ~~extinguishment~~three ofmonths ~~debt~~ended ofSeptember 30, 2017 increased $0.9 million, or 10.2%, to $9.8 million compared to $8.9 million for the ~~three~~same period in 2016. Comprising that increase, ~~months~~the cost of revenue for subscription and support services decreased $0.7 million, or 12.7%, to $5.1 million for the three months ended ~~June~~September 30, 2017 ~~was~~compared ~~related~~ to ~~repayment~~$5.8 ofmillion for the ~~outstanding~~same ~~term~~period ~~loans~~in ~~and~~2016. ~~other~~Cost ~~obligations~~of ~~under~~revenue ~~the~~for ~~Crystal~~embedded ~~Loan~~devices and hardware ~~Agreement~~increased ~~which~~$0.4 ~~took~~million, ~~place~~or on12.2% ~~June~~to 7$3.5 million for the three months ended September 30, 2017 compared to $3.1 million for the same period in 2016.

~~Interest~~Inventory ~~expense~~reserve ~~was $0.7 million in~~ expense for the three months ended ~~June~~September 30, 2017 ~~compared~~increased to $01.53 million incompared ~~interest~~to ~~expense~~$0.0 million for the same period in 2016. The increase in the reserve is ~~due~~ related to current ~~interest~~inventory ~~expense~~which onwill be impacted by the introduction of our ~~subordinated~~LTE ~~debt~~products.

19Total gross profit for the period ended September 30, 2017 decreased $3.0 million, or 35.6% to $5.5 million compared to $8.5 million for the same period in 2016 for the reasons stated above. Gross profit margin percentage decreased to 35.7% for the three months ended September 30, 2017 from 48.7% for the same period in 2016. The decrease in gross margin was driven primarily by an increase in the inventory reserve of $1.3 million for the three months ended September 30, 2017.

WeSales ~~recorded~~and ~~tax~~marketing expense ofdecreased $0.1.0 million, ~~and~~or ~~a tax benefit of $0~~32.~~2 million~~4%, for the three months ended ~~June~~September 30, 2017, ~~and~~to ~~2016 respectively~~$2.2 ~~The~~million ~~effective~~compared ~~tax~~to ~~rates were (2~~$3.2%) ~~and~~million ~~2.7%~~ for the ~~three months~~same ~~ended~~period ~~June~~in ~~30, 2017 and~~ 2016~~, respectively~~. ~~For~~The ~~both~~decrease ~~periods,~~is primarily ~~the~~attributable ~~difference in the effective tax rate compared~~ to ~~the federal statutory rate, and the reason we recorded deferred income tax expense while generating~~ a ~~net~~decline ~~loss~~in ~~before~~promotional ~~income~~activities ~~taxes,~~during ~~are due primarily to~~ the ~~book~~quarter and ~~tax~~reduced ~~basis~~travel ~~and accounting difference for certain long and indefinite lived assets~~costs. ~~We have also recognized a provision for income tax expense for certain state income taxes that cannot utilize offsetting net operating losses.~~

~~Six~~General ~~Months~~and ~~Ended~~administrative ~~June~~expense decreased $1.0 million, or 29.5%, to $2.3 million for the three months ended September 30, 2017, ~~and~~compared to $3.3 million for the same period in 2016. The decrease is driven primarily by reduced general and administrative salary cost resulting from a reduction in headcount and lower travel costs.

~~The~~Engineering ~~following~~and ~~table~~development ~~sets~~expenses ~~forth~~decreased ~~selected~~$0.9 ~~consolidated~~million, ~~results of~~or ~~operations~~39.8% to $1.3 million for the ~~periods~~three ~~indicated~~months ended September 30, ~~including~~2017, ~~comparative~~compared ~~information~~to ~~between~~$2.2 million for the ~~periods~~same ~~(dollars~~period in ~~thousands):~~2016. The decrease is primarily related to reduced headcount in engineering and development, and lower travel costs.

	Six Months Ended June 30,										Change from
	2017					2016					2016 to 2017
Net revenues:
Subscription and support revenues	$	26,150		86.1	%	$	29,794		83.6	%	$	(3,644	)	-12.2	%
Embedded devices and hardware		4,216		13.9	%		5,862		16.4	%		(1,646	)	-28.1	%
Total net revenues		30,366		100.0	%		35,656		100.0	%		(5,290	)	-14.8	%
Cost of sales
Subscription and support revenues		10,828		35.7	%		11,414		32.0	%		(586	)	-5.1	%
Embedded devices and hardware		4,344		14.3	%		6,432		18.0	%		(2,088	)	-32.5	%
Gross profit		15,194		50.0	%		17,810		49.9	%		(2,616	)	-14.7	%
Operating expenses:
Sales and marketing		5,835		19.2	%		6,215		17.4	%		(380	)	-6.1	%
General and administrative		5,377		17.7	%		7,988		22.4	%		(2,611	)	-32.7	%
Engineering and development		3,919		12.9	%		4,691		13.2	%		(772	)	-16.5	%
Depreciation and amortization		2,966		9.8	%		3,335		9.4	%		(369	)	-11.1	%
Impairment of goodwill and other
other intangible assets		-		0.0	%		4,172		11.7	%		(4,172	)	-100.0	%
Restructuring charges		780		2.6	%		1,243		3.5	%		(463	)	-37.2	%
Operating loss		(3,683	)	-12.1	%		(9,834	)	-27.6	%		6,151		-62.5	%
Interest expense		1,363		4.5	%		727		2.0	%		636		87.5	%
Loss on extinguishment of debt		1,089		3.6	%		290		0.8	%		799		75.5	%
Other expense (income), net		801		2.6	%		(65	)	-0.2	%		866		-1332.3	%
Loss before income taxes		(6,936	)	-22.8	%		(10,786	)	-30.3	%		3,850		-35.7	%
Income tax expense (benefit)		165		0.5	%		(170	)	-0.5	%		335		-197.1	%
Net loss	$	(7,101	)	-23.4	%	$	(10,616	)	-29.8	%	$	3,515		-33.1	%
Adjusted EBITDA(1)	$	1,938		6.4	%	$	1,484		4.2	%	$	454		30.6	%

Depreciation and amortization expense decreased $0.2 million, or 14.0% to $1.4 million for the three months ended September 30, 2017, compared to $1.7 million for the same period in 2016.

~~(1)~~Restructuring –charges ~~Adjusted~~were ~~EBITDA~~$0.7 ismillion ~~not~~for athe ~~financial~~three ~~measure~~months ~~prepared~~ended inSeptember ~~accordance~~30, ~~with~~2017, ~~accounting~~compared ~~principles~~to ~~generally~~$0.3 ~~accepted~~million infor the ~~United~~same ~~States~~period ofin ~~America (GAAP)~~2016. ~~See~~The ~~further~~increase ~~discussion,~~is ~~including reconciliation~~due primarily to ~~the~~legal ~~most~~costs ~~comparable~~incurred related ~~GAAP~~to ~~measure,~~merger ~~under the caption Non-GAAP Financial Measures below~~activity.

~~Total~~Interest ~~revenue~~expense ~~decreased~~was $50.39 million, orin ~~14.8%,~~expense for the ~~six~~three months ended ~~June~~September 30, 2017 compared to $300.45 million ~~from~~in ~~$35.7~~interest ~~million~~expense for the same period in 2016. The ~~decrease~~increase ~~in total revenue~~ is ~~primarily related~~due to ~~the~~interest expense ~~decreases~~on inour ~~subscription~~subordinated ~~and~~debt, ~~support~~as ~~revenue~~well ~~and~~as ~~embedded~~interest ~~devices~~incurred ~~and~~on ~~hardware~~our ~~revenue,~~senior ~~which is discussed below~~debt.

~~Subscription~~We ~~and~~recorded ~~support~~tax ~~revenues~~expense ~~decreased~~of $30.61 million~~, or~~ ~~12.2%,~~and toa tax benefit of $260.1 million ~~from~~for ~~$29.8~~the ~~million~~three inmonths ended September 30, 2017, and 2016 respectively. The ~~decrease~~effective istax ~~driven~~rates bywere 2G(2.4%) ~~disconnects~~and ~~associated~~3.3% ~~with~~ for the ~~AT&T 2G~~three ~~network~~months ~~sunset~~ended ~~that~~September ~~occurred~~30, on2017 ~~December~~and 312016, ~~2016~~respectively. ~~Embedded~~For ~~devices~~both ~~and~~periods, ~~hardware~~the ~~revenue~~difference ~~decreased~~in ~~$1.7~~the ~~million,~~effective ortax ~~28.1%,~~rate compared to ~~$4.2~~the ~~million~~federal ~~from~~statutory ~~$5.9~~rate, ~~million~~and inthe ~~2016.~~reason ~~The~~we ~~decrease~~recorded isdeferred ~~driven~~income bytax ~~customer’s~~expense ~~replacement~~while ofgenerating ~~their~~a 2Gnet ~~products~~loss inbefore income ~~2016~~taxes, inare ~~anticipation~~due ofprimarily to the ~~AT&T~~book 2Gand ~~network~~tax ~~sunset~~basis and accounting difference for certain long and indefinite lived assets. We have also recognized a provision for income tax expense for certain state income taxes that ~~occurred~~cannot onutilize ~~December~~offsetting ~~31,~~net ~~2016~~operating losses.

~~Total~~Nine ~~cost~~Months ofEnded ~~sales~~September ~~for the six months ended June~~ 30, 2017 ~~decreased~~ ~~$2.6 million, or 14.7%, to $15.2 million compared to $17.9 million for the same period in 2016. Comprising that decrease, the cost of sales for subscription~~ and ~~support services decreased $0.6 million, or 5.1%, to $10.8 million for the six months ended June 30, 2017 compared to $11.4 million for the same period in~~ 2016. Cost of sales for embedded devices and hardware decreased $2.1 million, or 32.5% to $4.4 million for the six months ended June 30, 2017 compared to $6.4 million for the same period in 2016. The total decrease in cost of sales is primarily related to a reduction of embedded devices and hardware sales in 2017 versus the comparable period in 2016.

~~Total~~The ~~gross~~following ~~profit~~table ~~for~~sets ~~the~~forth ~~period~~selected ~~ended~~consolidated ~~June~~results ~~30, 2017 decreased~~of ~~$2.6~~operations ~~million, or 14.7% to $15.2 million compared to $17.8 million~~ for the ~~same~~periods ~~period in 2016 for the reasons stated above. Gross profit margin percentage increased to 50.0% for the six months ended June 30~~indicated, ~~2017~~including ~~from~~comparative ~~49.9%~~information ~~for~~between the ~~same~~periods ~~period~~(dollars in ~~2016.~~thousands):

Sales and marketing expense decreased $0.4 million, or 6.1%, for the six months ended June 30, 2017 to $5.8 million compared to $6.2 million for the same period in 2016. The decrease is primarily attributable to a decline in promotional activities during the quarter, as well as reduced headcount and lower travel costs.

	Nine Months Ended September 30,										Change from
	2017					2016					2016 to 2017
Net revenues:
Subscription and support revenues	$	38,133		83.5	%	$	44,183		83.3	%	$	(6,050	)	-13.7	%
Embedded devices and hardware		7,535		16.5	%		8,886		16.7	%		(1,351	)	-15.2	%
Total net revenues		45,668		100.0	%		53,069		100.0	%		(7,401	)	-13.9	%
Cost of sales
Subscription and support revenues		15,915		34.8	%		17,242		32.5	%		(1,327	)	-7.7	%
Embedded devices and hardware		7,748		17.0	%		9,027		17.0	%		(1,279	)	-14.2	%
Inventory reserves		1,355		3.0	%		514		1.0	%		841		163.6	%
Gross profit		20,650		45.2	%		26,286		49.5	%		(5,636	)	-21.4	%
Operating expenses:
Sales and marketing		8,019		17.6	%		9,444		17.8	%		(1,425	)	-15.1	%
General and administrative		7,691		16.8	%		11,269		21.2	%		(3,578	)	-31.8	%
Engineering and development		5,260		11.5	%		6,920		13.0	%		(1,660	)	-24.0	%
Depreciation and amortization		4,392		9.6	%		4,992		9.4	%		(600	)	-12.0	%
Impairment of goodwill and other
other intangible assets		-		0.0	%		4,172		7.9	%		(4,172	)	-100.0	%
Restructuring charges		1,435		3.1	%		1,520		2.9	%		(85	)	-5.6	%
Operating loss		(6,147	)	-13.5	%		(12,031	)	-22.7	%		5,884		-48.9	%
Interest expense		2,282		5.0	%		1,196		2.3	%		1,086		90.8	%
Loss on extinguishment of debt		1,089		2.4	%		290		0.5	%		799		275.5	%
Other expense (income), net		767		1.7	%		(99	)	-0.2	%		866		-874.7	%
Loss before income taxes		(10,285	)	-22.5	%		(13,418	)	-25.3	%		3,133		-23.3	%
Income tax expense (benefit)		244		0.5	%		(257	)	-0.5	%		501		-194.9	%
Net loss	$	(10,529	)	-23.1	%	$	(13,161	)	-24.8	%	$	2,632		-20.0	%
Adjusted EBITDA⁽¹⁾	$	3,652		8.0	%	$	2,343		4.4	%	$	1,309		55.8	%

~~General~~(1) ~~and~~– ~~administrative~~Adjusted ~~expense~~EBITDA ~~decreased~~is ~~$2.6~~not ~~million,~~a orfinancial ~~32.7%,~~measure prepared toin ~~$5.4~~accordance ~~million~~with ~~for~~accounting ~~the~~principles ~~six~~generally ~~months~~accepted ~~ended~~in ~~June~~the ~~30,~~United ~~2017,~~States ~~compared~~of toAmerica $8(GAAP).0 ~~million~~See ~~for~~further ~~the~~discussion, ~~same period in 2016. The decrease is driven~~including ~~primarily~~reconciliation byto ~~reduced~~the ~~general~~most ~~and~~comparable ~~administrative~~GAAP ~~salary~~measure, ~~cost~~under ~~resulting~~the ~~from~~caption aNon-GAAP ~~reduction~~Financial inMeasures ~~headcount and lower travel costs~~below.

~~Engineering~~Total ~~and~~revenue ~~development expenses~~ decreased $07.84 million, or ~~16.5%~~ ~~to $3~~13.9%, ~~million~~ for the ~~six~~nine months ended ~~June~~September 30, 2017, ~~compared~~ to $445.7 million from $53.1 million for the same period in 2016. The decrease is ~~driven~~in total revenue is primarily related byto ~~reduced~~the ~~engineering~~decreases ~~and~~in ~~development~~subscription ~~salary~~and ~~costs~~support ~~resulting~~revenue ~~from~~and aembedded ~~reduction~~devices inand ~~headcount~~hardware revenue, ~~and~~which ~~lower~~is ~~travel costs~~discussed below.

~~Depreciation~~Subscription and ~~amortization~~support ~~expense~~revenues decreased $06.41 million, or 13.7%, 11to $38.1% tomillion from $344.02 million ~~for~~in 2016. The decrease is driven by 2G disconnects associated with the ~~six~~AT&T ~~months~~2G ~~ended~~network ~~June~~sunset that 30occurred on December 31, ~~2017~~2016. Embedded devices and hardware revenue decreased $1.4 million, ~~compared~~or 15.2%, to $37.35 million ~~for~~from $8.9 ~~the~~million ~~same~~in ~~period~~2016. The decrease is driven by customer’s replacement of their 2G products in 2016 in anticipation of the AT&T 2G network sunset that occurred on December 31, 2016.

~~Restructuring~~Total ~~charges~~cost ~~were~~of revenue for the nine months ended September 30, 2017 decreased $1.8 million, or 6.6%, to $25.0 million compared to $26.8 million for the ~~six~~same ~~months~~period ~~ended~~in 2016. Comprising that decrease, ~~June~~the cost of revenue for subscription and support services decreased $1.3 million, or 7.7%, to $15.9 million for the nine months ended September 30, 2017, compared to $17.2 million for the same period in 2016. Cost of revenue for embedded devices and hardware decreased $1.3 million, or 14.2% to $7.7 million for the nine months ended September 30, 2017 compared to $9.0 million for the same period in 2016. The total decrease in costs of sales is primarily related to ~~severance~~a ~~and~~reduction ~~the~~of ~~sublease loss~~embedded ~~recorded~~devices inand ~~June~~hardware sales ~~2016~~in ~~for~~2017 versus the ~~relocation~~comparable ofperiod ~~our~~in ~~corporate headquarters~~2016.

Loss on the extinguishment of debt of $1.1 million for the six months ended June 30, 2017 was related to the refinancing of our debt with Crystal which took place on June 7, 2017. Loss on the extinguishment of debt of $0.3 million for the six months ended June 30, 2016 was related to the refinancing of our debt with Silicon Valley Bank which took place in March 2016.21

~~Interest~~Inventory ~~expense~~reserve ~~was $1.4 million in~~ expense for the ~~six~~nine months ended ~~June~~September 30, 2017 ~~compared~~increased $0.8 million, or 163.6%, to $01.74 million incompared ~~interest~~to ~~expense~~$0.5 million for the same period in 2016. The increase in the reserve is ~~due~~related to ~~interest~~current ~~expense on~~inventory ~~our~~which ~~subordinated~~will ~~debt,~~be asimpacted ~~well~~by ~~higher~~the ~~interest~~introduction ~~rates~~of on our ~~debt~~LTE products.

~~Other~~Total ~~expense~~gross ~~(income)~~profit for the period ended September 30, ~~net~~2017 ~~was~~decreased $5.6 million, or 21.4% to $020.87 million compared to $26.3 million for the same period in ~~expense~~2016 for the ~~six~~ ~~months~~reasons ~~ended~~stated ~~June~~above. ~~30,~~Excluding the ~~2017~~inventory reserve, ~~and~~gross ~~was~~profit ~~primarily~~margin ~~due~~percentage decreased to ~~non-capitalizable~~48.2% ~~finance~~for ~~and~~the ~~legal~~nine ~~charges~~months ~~related~~ended toSeptember ~~our~~30, ~~debt~~2017 from 50.5% for the same period in 2016.

WeSales ~~recorded~~and ~~tax~~marketing expense ofdecreased $01.24 million, ~~and~~or ~~a tax benefit of $0~~15.~~2 million~~1%, for the ~~six~~nine months ended ~~June~~September 30, 2017, ~~and~~to ~~2016 respectively~~$8.0 ~~The~~million ~~effective~~compared ~~tax~~to ~~rates were (2~~$9.~~2%)~~4 ~~and~~million ~~1.6%~~ for the ~~six months~~same ~~ended~~period ~~June~~in ~~30, 2017 and~~ 2016~~, respectively~~. ~~For~~The ~~both~~decrease ~~periods,~~is primarily ~~the~~attributable ~~difference in the effective tax rate compared~~ to ~~the federal statutory rate, and the reason we recorded deferred income tax expense while generating~~ a ~~net~~decline ~~loss~~in ~~before~~promotional ~~income~~activities ~~taxes,~~during ~~are due primarily to~~ the ~~book~~quarter, ~~and~~as ~~tax~~well ~~basis~~as ~~and~~reduced ~~accounting~~headcount ~~difference for certain long~~ and ~~indefinite~~lower ~~lived assets. We have also recognized~~travel ~~a provision for income tax expense for certain state income taxes that cannot utilize offsetting net operating losses~~costs.

~~Segment~~General ~~Information~~and administrative expense decreased $3.6 million, or 31.8%, to $7.7 million for the nine months ended September 30, 2017, compared to $11.3 million for the same period in 2016. The decrease is driven primarily by reduced general and administrative salary cost resulting from a reduction in headcount and lower travel costs.

~~We have~~Engineering ~~one~~and ~~reportable~~development ~~segment,~~expenses ~~providing~~decreased ~~interactive~~$1.7 ~~and~~million, ~~on-demand~~or ~~Machine~~24.0% to ~~Machine~~$5.3 ~~(M2M)~~million ~~enterprise~~for ~~solutions~~the ~~enabling~~nine months ended September 30, 2017, compared to $6.9 million for the ~~Internet~~same ofperiod ~~Things~~in ~~(IoT)~~2016. The decrease is driven primarily by reduced engineering and development salary costs resulting from a reduction in headcount, and lower travel costs.

21Depreciation and amortization expense decreased $0.6 million, or 12.0% to $4.4 million for the nine months ended September 30, 2017, compared to $5.0 million for the same period in 2016.

~~Non-GAAP~~Restructuring ~~Financial~~charges ~~Measures~~were $1.4 million for the nine months ended September 30, 2017, compared to $1.5 million for the same period in 2016. The decrease is primarily related to severance and the sublease loss recorded in June 2016 for the relocation of our corporate headquarters offset by legal costs associated with merger and debt activity.

~~Earnings~~Loss ~~before~~on ~~interest,~~the ~~taxes,~~extinguishment ~~depreciation~~of ~~and~~debt ~~amortization~~of ~~expenses (EBITDA)~~$1.1 ~~and~~million ~~Adjusted~~for ~~EBITDA,~~the ~~which~~nine months ~~are~~ended ~~presented~~September ~~below~~30, ~~are~~2017 ~~non-GAAP~~was ~~measures~~related ~~and~~to dothe ~~not~~refinancing ~~purport~~of toour bedebt ~~alternatives~~with toCrystal ~~operating income~~which astook aplace ~~measure~~on ofJune ~~operating~~7, ~~performance~~2017. WeLoss on ~~believe~~the ~~EBITDA~~extinguishment ~~and~~of ~~Adjusted~~debt ~~EBITDA~~of ~~are~~$0.3 ~~useful~~million tofor ~~and~~the ~~used~~nine bymonths ~~investors~~ended ~~and~~September ~~other users~~30, of2016 ~~the~~was ~~financial~~related ~~statements~~to inthe ~~evaluating~~refinancing of our debt ~~operating performance because it provides them~~ with anSilicon ~~additional~~Valley ~~tool~~Bank towhich ~~compare business~~took ~~performance~~place ~~across~~in ~~periods~~March 2016.

WeInterest ~~believe~~expense ~~that:~~was $2.3 million in expense for the nine months ended September 30, 2017 compared to $1.2 million in interest expense for the same period in 2016. The increase is due to interest expense on our subordinated debt, as well higher interest rates on our debt, as well as higher amortization of deferred financing costs in 2017.

·Other ~~EBITDA~~expense is(income), ~~widely~~net ~~used~~was by$0.8 ~~investors~~million toin ~~measure~~expense afor ~~company’s~~the nine ~~operating~~months ~~performance~~ended ~~without~~September ~~regard to items such as interest~~30, ~~income tax~~2017, and ~~depreciation~~was ~~and~~primarily ~~amortization~~due ~~expenses,~~to ~~which can vary substantially from company~~non-~~to-company~~capitalizable ~~depending~~finance ~~upon accounting methods~~ and ~~book~~legal ~~value~~charges ofrelated ~~assets,~~to ~~capital~~our ~~structure and the method by which assets were acquired; and~~debt.

·We ~~Investors~~recorded ~~commonly~~tax ~~adjust~~expense ~~EBITDA~~of ~~information~~$0.2 tomillion ~~eliminate~~and ~~the~~a ~~effect~~tax benefit of ~~equity-based~~$0.3 million ~~compensation~~for the nine months ended September 30, 2017, and ~~other~~2016 ~~unusual~~respectively. orThe ~~infrequently~~effective ~~occurring~~tax ~~items~~rates ~~which~~were ~~vary~~(2.4%) ~~widely~~and ~~from~~1.9% ~~company-~~for the nine months ended September 30, 2017 and 2016, respectively. For both periods, the difference in the effective tax rate compared to~~-company~~ the federal statutory rate, and ~~impair~~the ~~comparability~~reason we recorded deferred income tax expense while generating a net loss before income taxes, are due primarily to the book and tax basis and accounting difference for certain long and indefinite lived assets. We have also recognized a provision for income tax expense for certain state income taxes that cannot utilize offsetting net operating losses.

~~We use EBITDA and Adjusted EBITDA:~~22

·Segment ~~as a measure of operating performance to assist in comparing performance from period-to-period on a consistent basis;~~Information

·We have asone areportable ~~measure~~segment, ~~for~~providing ~~planning~~interactive and ~~forecasting~~on-demand Machine ~~overall~~to ~~expectations~~Machine ~~and~~(M2M) ~~for~~enterprise ~~evaluating~~solutions ~~actual~~enabling ~~results~~the ~~against~~Internet ~~such~~of ~~expectations;~~Things ~~and~~(IoT).

·Non-GAAP inFinancial ~~communications with the board of directors, analysts and investors concerning our financial performance.~~Measures

~~Although~~Earnings webefore ~~believe~~interest, taxes, depreciation and amortization expenses ~~for~~(EBITDA) ~~the~~and ~~foregoing~~Adjusted ~~reasons~~EBITDA, ~~that~~which ~~the~~are ~~presentation~~presented ofbelow, are non-GAAP ~~financial~~ measures ~~provides~~and ~~useful~~do ~~supplemental~~not ~~information~~purport to ~~investors~~be alternatives to operating ~~regarding~~income ~~our~~as ~~results~~a measure of ~~operations,~~operating ~~the~~performance. ~~non-GAAP~~We ~~financial~~believe ~~measures~~EBITDA ~~should~~and ~~only~~Adjusted beEBITDA ~~considered~~are inuseful ~~addition~~ to, and ~~not~~used asby ainvestors ~~substitute~~and other ~~for,~~users orof ~~superior~~the ~~to,~~financial ~~any~~statements ~~measure~~in ofevaluating ~~financial~~our operating performance ~~prepared~~because init ~~accordance~~provides them with ~~GAAP~~an additional tool to compare business performance across periods.

~~Use~~We ofbelieve ~~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.:

· EBITDA is ~~calculated by~~widely ~~adding~~used ~~depreciation~~by ~~and~~investors ~~amortization~~to ~~expense,~~measure ~~impairment~~a ofcompany’s ~~non-current~~operating ~~assets,~~performance ~~interest~~without ~~expense,~~regard ~~other~~to ~~net~~items ~~non-operating~~such ~~expense and~~as interest, income tax, ~~expense~~ and ~~subtracting~~depreciation ~~other net non-operating income~~ and ~~income~~amortization ~~tax~~expenses, ~~benefit~~which tocan ~~net~~vary ~~(loss)~~substantially ~~income.~~from ~~Adjusted EBITDA is calculated by excluding the effect of equity~~company-~~based compensation and additional non~~to-~~cash~~company ~~and~~depending ~~other~~upon ~~charges~~accounting ~~from~~methods ~~the calculation of EBITDA. Management believes that this measure provides additional relevant~~ and ~~useful~~book ~~information~~value ~~to investors and other users~~ of ~~our financial data~~assets, ~~including~~capital ~~our~~structure ~~lender,~~and ~~in evaluating~~ the ~~effectiveness~~method ofby ~~our~~which ~~operations~~assets ~~and~~were ~~underlying~~acquired; ~~business trends in a manner that is consistent with management’s evaluation of business performance.~~and

We· ~~believe~~Investors ~~that~~commonly ~~excluding depreciation~~adjust ~~and amortization expenses of property, equipment and intangible assets to calculate~~ EBITDA ~~and Adjusted EBITDA provides supplemental~~ information ~~and an alternative presentation that is useful~~ to ~~our~~eliminate ~~lender~~the ~~and~~effect ~~investors’ understanding~~ of ~~our core~~equity-based ~~operating~~compensation ~~results~~ and ~~trends.~~other ~~Not~~unusual ~~only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present~~ or ~~future~~infrequently ~~replacement~~occurring ~~costs,~~items ~~but~~which ~~also~~vary ~~they~~widely ~~are~~from ~~based~~company-to-company onand ~~our~~impair ~~estimates of remaining useful lives~~comparability.

We ~~believe~~use ~~that~~EBITDA ~~excluding the effects of equity-based compensation from non-GAAP financial measures provides supplemental information~~ and anAdjusted 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.EBITDA:

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

~~Equity-based~~· ~~compensation~~as isa anmeasure ~~important~~for ~~part~~planning ofand ~~total~~forecasting ~~compensation, especially~~overall ~~from~~expectations ~~the~~and ~~perspective~~for ofevaluating ~~employees.~~actual Weresults ~~believe,~~against ~~however,~~such ~~that~~expectations; 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.~~

~~Restructuring,~~· ~~non-cash~~in ~~and~~communications ~~other~~with ~~charges,~~the ~~includes~~board ~~severance, one-time~~of ~~facility costs~~directors, ~~inventory~~analysts ~~reserves, one-time legal costs for transaction related work,~~ and ~~other~~investors ~~one-time~~concerning ~~items.~~our Wefinancial ~~believe 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~~performance.

~~EBITDA~~Although ~~and~~we ~~Adjusted~~believe, for ~~EBITDA~~the ~~are~~foregoing ~~not~~reasons, ~~measures~~that ofthe ~~liquidity calculated~~presentation inof ~~accordance with~~ non-GAAP, ~~and~~financial ~~should~~measures beprovides ~~viewed~~useful assupplemental ainformation ~~supplement~~ to –investors regarding ~~not~~our ~~a substitute for –~~ results of operations ~~presented~~, on the ~~basis of~~ non-GAAP. ~~EBITDA~~financial ~~and~~measures ~~Adjusted~~should ~~EBITDA~~only dobe ~~not~~considered ~~purport~~in addition to, ~~represent~~and ~~cash~~not ~~flow~~as ~~provided~~a ~~by operating activities~~substitute asfor, ~~defined~~or bysuperior ~~GAAP. Furthermore~~to, ~~EBITDA~~any ~~and~~measure ~~Adjusted~~of ~~EBITDA~~financial ~~are~~performance ~~not~~prepared ~~necessarily~~in ~~comparable~~accordance towith ~~similarly-titled measures reported by other companies~~GAAP.

~~The~~Use ~~following~~of ~~table~~non-GAAP ~~reconciles~~financial measures is subject to inherent limitations because they do not include all the ~~specific~~expenses ~~items~~that ~~excluded~~must ~~from~~ be included under GAAP inand because they involve the ~~calculation~~exercise of ~~EBITDA~~judgment ~~and~~of ~~Adjusted~~which ~~EBITDA~~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 ~~periods~~same ~~indicated~~non-GAAP ~~below~~measures, (and may not be calculated in ~~thousands~~the same manner, ~~except~~as ~~per~~those ~~share~~used ~~amounts):~~by other companies.

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2017			2016			2017			2016
Net loss	$	(3,076	)	$	(8,290	)	$	(7,101	)	$	(10,616	)
Depreciation and amortization expense		1,835			2,005			3,808			3,969
Impairment of goodwill and other intangible assets		-			4,172			-			4,172
Interest expense and other non- operating expense, net		1,673			438			3,253			952
Income tax expense (benefit)		81			(234	)		165			(170	)
EBITDA (non-GAAP)		513			(1,909	)		125			(1,693	)
Equity-based compensation expense		515			830			745			1,451
Restructuring, non-cash and other charges		375			1,706			1,068			1,726
Adjusted EBITDA (non-GAAP)	$	1,403		$	627		$	1,938		$	1,484

EBITDA is calculated by adding depreciation and amortization expense, impairment of non-current assets, interest expense, other net non-operating expense and income tax expense and subtracting other net non-operating income and income tax benefit to net (loss) income. Adjusted EBITDA is calculated by excluding the effect of equity-based compensation and additional non-cash and other charges 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, including our lender, in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.

~~Restructuring,~~We ~~non-cash~~believe that excluding depreciation and ~~other~~amortization ~~charges,~~expenses ~~includes~~of ~~severance~~property, ~~one-time~~ ~~facility~~equipment ~~costs,~~and ~~inventory~~intangible ~~reserves,~~assets ~~one-time~~to ~~legal~~calculate ~~costs~~EBITDA ~~for~~and ~~transaction~~Adjusted ~~related~~EBITDA ~~work,~~provides supplemental information and ~~other~~an ~~one-time~~alternative ~~items.~~presentation Wethat ~~believe~~is useful to our lender and investors’ understanding of our ~~these~~core ~~costs~~operating results and trends. Not only are ~~unusual~~depreciation ~~costs~~and ~~that~~amortization weexpenses dobased ~~not~~on ~~expect~~historical tocosts ~~recur~~of assets that may have little bearing on apresent ~~regular~~or ~~basis,~~future ~~and~~replacement ~~consequently~~costs, webut doalso ~~not~~they ~~consider~~are ~~these~~based ~~charges as~~on aour ~~component~~estimates of ~~ongoing~~remaining ~~operations~~useful lives.

~~Liquidity and Capital Resources~~23

We ~~use~~believe that excluding the ~~net~~effects ~~cash~~of ~~generated~~equity-based compensation from ~~our~~non-GAAP ~~operations~~financial tomeasures ~~fund~~provides ~~new~~supplemental ~~product development,~~information ~~upgrades~~and an alternative presentation useful to investors’ understanding of our ~~technology~~core operating results and totrends. ~~invest~~Investors inhave ~~new~~indicated ~~businesses.~~that ~~Our~~they ~~sources~~consider financial measures of ~~funds,~~our ~~principally~~results ~~from~~of operations ~~and,~~ toexcluding ~~the~~equity-based ~~extent~~compensation ~~necessary,~~as ~~from~~important ~~external~~supplemental ~~financing~~information ~~arrangements,~~useful ~~are sufficient~~ to ~~meet~~their ~~ongoing~~understanding ~~operations~~of ~~and~~our ~~investing~~historical ~~requirements~~results ~~through~~and atestimating ~~least~~our ~~June~~future ~~2018~~results.

WeEquity-based ~~had~~compensation ~~working~~is ~~capital~~an ofimportant ~~$2.4~~part ~~million as~~ of ~~June~~total 30compensation, ~~2017, compared~~ toespecially ~~$8.6~~from ~~million~~the asperspective of ~~December 31, 2016~~employees. We ~~had~~believe, ~~cash~~however, ~~balances~~that ofsupplementing ~~$5.6~~GAAP ~~million~~income asfrom ofcontinuing ~~June~~operations ~~30,~~by providing ~~2017~~income ~~compared~~from tocontinuing ~~$9.5~~operations, ~~million~~excluding ~~at December~~the ~~31,~~effect ~~2016.~~of ~~The~~equity-based ~~Company~~compensation ~~does~~in ~~not~~all ~~have~~periods, ~~any~~is ~~additional~~useful ~~borrowing~~to ~~capacity~~investors because ~~under~~it ~~the~~enables ~~Note~~additional ~~Purchase~~and ~~Agreement~~more ~~with~~meaningful ~~Hale Capital~~period-to-period comparisons.

23Restructuring, non-cash and other charges, includes severance, one-time facility costs, inventory reserves, one-time legal costs for transaction related work, and other one-time items. We believe 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.

~~Net~~EBITDA ~~cash~~and ~~used~~Adjusted EBITDA are not measures of liquidity calculated in ~~operating~~accordance ~~activities~~with GAAP, and should be viewed as a supplement to – not a substitute for ~~the~~– ~~six~~results ~~month~~of ~~period~~operations ~~ended~~presented ~~June~~on ~~30,~~the ~~2017~~basis ~~was~~of $2GAAP.9 ~~million~~EBITDA and ~~net~~Adjusted EBITDA do not purport to represent cash ~~used~~flow inprovided ~~operations~~by ~~was~~operating $1activities as defined by GAAP.4 ~~million~~Furthermore, ~~for~~EBITDA ~~the~~and ~~six~~Adjusted ~~month~~EBITDA ~~period~~are ~~ended~~not ~~June~~necessarily ~~30,~~comparable ~~2016~~to similarly-titled measures reported by other companies.

~~Net~~The ~~cash~~following ~~used~~table inreconciles ~~investing activities for~~ the ~~six~~specific ~~month~~items ~~period~~excluded ~~ended~~from ~~June~~GAAP ~~30,~~in ~~was~~the ~~$1.3~~calculation ~~million, representing expenditures~~ of ~~$0.2~~EBITDA ~~million for tangible assets~~ and ~~$1.1~~Adjusted ~~million~~EBITDA for ~~software~~the ~~and~~periods ~~capitalization of~~indicated ~~internally~~below ~~developed~~(in ~~software~~thousands, ~~compared~~except toper ~~$1.8~~share ~~million for the six month period ended June 30, 2016.~~amounts):

Net cash provided by financing activities for the six month period ended June 30, 2017 was $0.3 million, primarily due to the refinancing of our term debt under the Crystal Loan Agreement with the Notes issued under the Note Purchase Agreement. Net cash used in financing activities was $3.1million for the six month period ended June 30, 2016.

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2017			2016			2017			2016
Net loss	$	(3,426	)	$	(2,546	)	$	(10,529	)	$	(13,161	)
Depreciation and amortization expense		1,883			2,029			5,691			5,997
Impairment of goodwill and other
intangible assets		-			-			-			4,172
Interest expense and other non-
operating expense, net		885			436			4,138			1,387
Income tax (benefit) expense		79			(87	)		244			(257	)
EBITDA (non-GAAP)		(579	)		(168	)		(456	)		(1,862	)
Equity-based compensation expense		366			751			1,111			2,202
Restructuring, non-cash and other items		1,929			276			2,997			2,003
Adjusted EBITDA (non-GAAP)	$	1,716		$	859		$	3,652		$	2,343

~~Off~~Restructuring, non-~~Balance~~cash ~~Sheet~~and ~~Arrangements~~other charges, includes severance, one-time facility costs, inventory reserves, one-time legal costs for transaction related work, and other one-time items. We believe 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

AsLiquidity ofand ~~June~~Capital ~~30, 2017, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.~~Resources

~~Critical~~We ~~Accounting~~use ~~Policies~~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 through at least September 2018.

~~There~~We ~~have~~had ~~been~~working nocapital ~~material~~of ~~changes~~$0.0 inmillion ~~our~~as ~~critical~~of ~~accounting~~September ~~policies~~30, 2017, ~~estimates~~compared ~~and~~to ~~judgments~~$8.6 ~~during~~million ~~the~~as ~~three~~of ~~months~~December ~~ended June 30~~31, ~~2017,~~2016. ~~compared~~We tohad ~~the~~cash ~~disclosures~~balances inof ~~Part~~$6.8 ~~II,~~million ~~Item~~as 7 of ~~our~~September ~~Annual Report~~30, on2017 ~~Form~~compared ~~10-K~~to ~~for~~$9.5 million ~~the~~at ~~year ended~~ December 31, 2016,. ~~except~~The ~~for~~Company ~~the~~does ~~early~~not ~~adoption~~have ofany ~~guidance~~additional ~~which~~borrowing ~~changes~~capacity ~~the~~under ~~classification analysis~~its ofloan ~~certain~~agreement ~~equity-linked instruments~~ with ~~down~~Hale ~~round features~~Capital.~~, which is discussed in Note J – Recent Accounting~~ ~~Pronouncements.~~

24Net cash used in operating activities for the nine month period ended September 30, 2017 was $0.8 million and net cash used in operations was $0.8 million for the nine month period ended September 30, 2016.

~~Item 3. Quantitative and Qualitative Disclosures about Market Risks.~~24

~~The~~Net ~~market~~cash ~~risk~~used in ~~our~~investing ~~financial~~activities ~~instruments represents~~for the ~~potential~~nine ~~loss~~month ~~arising~~period ended ~~from~~September ~~adverse~~30, ~~changes~~2017 inwas ~~financial rates~~$2.1 Wemillion, ~~are~~representing ~~exposed~~expenditures toof ~~market~~$0.3 ~~risk~~million infor ~~the~~tangible ~~area~~assets ofand ~~interest rates~~$1.8 ~~These~~million ~~exposures~~for ~~are~~software and ~~directly~~capitalization ~~related~~of internally developed software, compared to ~~our~~$2.5 ~~normal~~million ~~funding~~for ~~and~~the ~~investing~~nine ~~activities~~month period ended September 30, 2016.

WeNet ~~also hold~~ cash ~~balances~~provided inby ~~accounts with~~financing ~~commercial~~activities ~~banks~~for in the ~~United~~nine ~~States~~month ~~and~~period ended ~~foreign~~September ~~countries.~~30, ~~These~~2017 ~~cash~~was ~~balances~~$0.2 ~~represent~~million, ~~operating~~primarily ~~balances~~due ~~only~~to ~~and~~the ~~are invested~~refinancing inof ~~short-~~our term ~~time~~debt ~~deposits~~with ~~of the local bank~~Hale. ~~Such~~Net ~~operating~~ cash ~~balances~~used ~~held~~in ~~at banks outside the United States are~~financing ~~denominated~~activities inwas ~~the local currency and are minor. We held~~ $0.3.2 million infor ~~foreign~~the ~~bank~~nine ~~accounts as~~month ofperiod ~~June~~ended September 30, ~~2017 and December 31,~~ 2016~~, respectively~~.

~~Foreign~~Off-Balance ~~Currency~~Sheet Arrangements

~~The~~As ~~assets and liabilities~~ of ~~our~~September ~~foreign operations~~30, ~~are translated into U.S. dollars at current exchange rates~~2017, ~~and~~we ~~revenues~~did ~~and~~not ~~expenses~~have ~~are~~any ~~translated~~off-balance ~~at the ending exchange~~sheet ~~rate~~arrangements, ~~from the prior period which materially approximates the average exchange rates for each period. Resulting translation adjustments are reflected~~ as ~~other~~defined ~~comprehensive~~in Item 303(~~loss~~a)(4)(ii) 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~~SEC asRegulation ~~incurred. Except for transactions with customers and vendors in Canada, substantially all other transactions are denominated in U.~~S-K. ~~dollars. Foreign operations were not significant to us for the quarter or year to date ended June 30, 2017.~~

~~Interest~~Critical ~~Rate~~Accounting ~~Risk~~Policies

WeThere ~~are~~have ~~exposed~~been tono material changes in ~~interest rates on~~ our ~~long~~critical ~~term~~accounting ~~debt~~policies, ~~that~~estimates ~~carries~~and ~~variable~~judgments ~~rate~~during ~~interest.~~the ~~The~~three ~~impact~~months ofended aSeptember ~~100~~30, ~~basis~~2017, ~~point~~compared ~~change~~to the disclosures in ~~interest~~Part ~~rates~~II, ~~would~~Item ~~result~~7 inof aour Annual ~~change~~Report inon ~~annual interest~~Form ~~expense~~10-K offor ~~$0.2~~the ~~million~~year ended December 31, 2016.

~~Item 4. Controls and Procedures.~~25

~~Our~~Item ~~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)~~3. ~~Our~~Quantitative ~~internal control system is designed to provide reasonable assurance to our management~~ and ~~the~~Qualitative ~~Board~~Disclosures ofabout ~~Directors~~Market ~~regarding the preparation and fair presentation of published financial statements~~Risks. 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 June 30, 2017. 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 June 30, 2017, our internal control over financial reporting is effective based on those criteria.

~~Changes~~The market risk in ~~Internal~~our ~~Control~~financial ~~Over~~instruments represents ~~Financial~~the potential loss arising from adverse changes in financial rates. We are exposed to market risk in the area of interest ~~Reporting~~rates. These exposures are directly related to our normal funding and investing activities.

~~During~~We ~~the~~also ~~quarter~~hold ~~ended~~cash ~~June~~balances ~~30,~~in ~~2017,~~accounts ~~there~~with ~~were~~commercial nobanks ~~significant changes~~ in ~~our~~the ~~internal~~United ~~control~~States ~~over~~and ~~financial~~foreign ~~reporting~~countries. ~~(as~~These ~~such~~cash ~~term~~balances isrepresent ~~defined~~operating inbalances ~~Rules~~only ~~13a-15(f)~~ and ~~15d~~are invested in short-~~15(f)~~term ~~under~~time deposits of the ~~Exchange~~local ~~Act)~~bank. ~~that~~Such ~~have~~operating ~~materially~~cash ~~affected,~~balances orheld at banks outside the United States are denominated ~~reasonably~~in ~~likely~~the tolocal ~~materially~~currency ~~affect,~~and ~~our~~are ~~internal~~minor. We held $0.7 million and $0.3 million in ~~control~~foreign ~~over~~bank ~~financial~~accounts ~~reporting~~as of September 30, 2017 and December 31, 2016, respectively.

25Foreign Currency

~~PART~~The ~~II—OTHER~~assets ~~INFORMATION~~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 or year to date ended September 30, 2017.

~~Item~~Interest 1.Rate ~~Legal Proceedings.~~Risk

We ~~currently~~ are ~~not~~exposed ~~involved~~to changes in ~~any~~interest ~~pending~~rates ~~material~~on ~~litigation~~our long term debt that carries variable rate interest. The impact of a 100 basis point change in interest rates would result in a change in annual interest expense of $0.2 million.

Item 1A4. ~~Risk~~Controls ~~Factors~~and Procedures.

~~For~~Our ~~information~~management ~~regarding~~is ~~factors~~responsible ~~that~~for ~~could~~establishing ~~affect~~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 ~~results~~management and the Board of Directors regarding the preparation and fair presentation of ~~operations,~~published financial ~~condition~~statements. ~~and~~All ~~liquidity~~internal control systems, ~~see~~no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance as to the ~~risk~~reliability of ~~factors~~financial ~~discussion~~statement ~~set~~preparation ~~forth~~and inpresentation. ~~Item~~Our 1Amanagement assessed the effectiveness of our ~~Annual~~internal ~~Report~~control onover financial ~~Form~~reporting ~~10-K~~as ~~for~~of ~~the~~September ~~fiscal~~30, ~~year~~2017. ~~ended~~In ~~December~~making 31this assessment, ~~2016~~our asmanagement ~~previously~~used ~~filed~~the ~~with~~criteria set forth by the ~~SEC,~~Committee ~~and~~of Sponsoring Organizations of the ~~information~~Treadway ~~under~~Commission (“~~Forward-Looking Statements~~COSO”) ~~included~~in Internal Control – Integrated Framework, issued in 2013. Based on this ~~Quarterly~~assessment, ~~Report~~management concludes that, as of September 30, 2017, our internal control over financial reporting is effective based on ~~Form~~those ~~10-Q~~criteria.

~~Item~~Changes 2.in ~~Unregistered~~Internal ~~Sales~~Control ofOver ~~Equity Securities and Use of Proceeds.~~Financial Reporting

~~None~~During the quarter ended September 30, 2017, there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and ~~not~~15d-15(f) ~~applicable~~under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Item 3. Defaults Upon Senior Securities.~~26

~~None~~PART -II—OTHER ~~not applicable.~~INFORMATION

Item 41. ~~Mine~~Legal ~~Safety Disclosures~~Proceedings.

~~None~~We -currently are not ~~applicable~~involved in any pending material litigation.

Item 51A. ~~Other~~Risk ~~Information~~Factors.

~~None~~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 ~~not~~for ~~applicable~~the fiscal year ended December 31, 2016 as previously filed with the SEC, and the information under “Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.

Item 62. ~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds.

Exhibit Number		Description
4.1		Warrant to Purchase Stock issued to HCP-FVF, LLC
10.1++		Note Purchase Agreement by and among Numerex Corp., as borrower, the other parties thereto designated as Borrowers and Guarantors, and HCP-FCF, LLC as Collateral Agent, dated as of June 7, 2017 (including the form of Note attached thereto as Exhibit A)
10.2		Guaranty and Collateral Agreement
31.1		Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)
31.2		Certification of Chief Financial Officer, Executive Vice President, and Principal Financial and Accounting Officer Pursuant to Exchange Act Rule 13a-14(a)
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income, (iii) Unaudited Consolidated Statements of Cash Flows, (iv) Unaudited Condensed Consolidated Statement of Shareholders Equity and (v) Unaudited Condensed Notes to Consolidated Financial Statements*

None - not applicable

*Item ~~This exhibit is furnished and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U~~3.~~S.C.~~ ~~78r),~~Defaults orUpon ~~otherwise~~Senior ~~subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the~~ Securities ~~Act or Securities Exchange Act, except to the extent that the Registrant specifically incorporates it by reference~~.

++None ~~Confidential~~- ~~treatment~~not ~~has been requested as to certain portions of this exhibit, which portions have been omitted and submitted separately to the Securities and Exchange Commission~~applicable.

26Item 4. Mine Safety Disclosures.

~~SIGNATURES~~None - not applicable.

~~Pursuant~~Item to5. ~~the~~Other ~~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~~Information.

	NUMEREX CORP.
	(Registrant)
August 8, 2017	/s/ Kenneth L. Gayron
	Kenneth L. Gayron
	Interim Chief Executive Officer, Chief Financial Officer and Principal Financial and Accounting Officer

None - not applicable.

27Item 6. Exhibits.

Exhibit
Number		Description

2.1¹		Agreement and Plan of Merger by and among Numerex Corp., Sierra Wireless, Inc. and Wireless Acquisition Sub, Inc., dated August 2, 2017

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

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

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

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

101

The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income, (iii) Unaudited Consolidated Statements of Cash Flows, (iv) Unaudited Condensed Consolidated Statement of Shareholders Equity and (v) Unaudited Condensed Notes to Consolidated Financial Statement*

* This exhibit is furnished and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

Incorporated by reference to Exhibit 2.1 filed with the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2017 (File No. 000-22920)

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)

November 7, 2017	/s/ Kenneth L. Gayron
	Kenneth L. Gayron
	Interim Chief Executive Officer, Chief Financial
	Officer and Principal Financial and Accounting Officer

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