DEFERRED COSTS

9 Months Ended

Sep. 30, 2011

Deferred Costs Disclosure [Abstract]

Deferred Costs Disclosure [Text Block]

NOTE 8 — DEFERRED COSTS

In 2009, the Company entered into a contract for a pilot program with ABCR, pursuant to which the Company’s rental fleet management system was implemented on a portion of ABCR’s fleet of vehicles. The term of the contract was for five years and ABCR was entitled to terminate the contract after 22 months, subject to a performance clause and early termination fees. As a result of the early termination clause, costs directly attributable to this contract, consisting principally of engineering and manufacturing costs, were being deferred until implementation of the system was completed. The deferred contract costs were charged to cost of product revenue in accordance with the cost recovery method, pursuant to which the deferred contract costs were reduced in each period by an amount equal to the product revenue recognized until all the capitalized costs were recovered, at which time the Company would recognize a gross profit, if any.

As described in Note 2 to the Unaudited Condensed Consolidated Financial Statements, concurrent with the execution of SOW#1 on August 22, 2011, the contract for the pilot program was terminated and payment terms for the vehicle management systems installed under the pilot program were incorporated into SOW#1.  Under the terms of SOW#1, the Company is entitled to issue sixty (60) monthly invoices of up to $53,000 for active vehicle management systems installed under the former pilot program. In the event that ABCR terminates SOW#1 then ABCR would be liable to the Company for the net present value of all future remaining charges under SOW#1 using the implicit rate in the lease, with the payment due on the effective date of termination. With the execution of SOW#1, the Company recognized the associated revenue since the sales price for the vehicle management systems implemented under the former pilot program is fixed and determinable and collectability is reasonably assured.  As a result of the change in contractual terms, which necessitated a new methodology of revenue recognition, during the third quarter of 2011, the Company recorded product revenue and a sales-type lease receivable for the net present value of the monthly product payments of approximately $2.0 million and recognized the remaining deferred contract costs of approximately $1.1 million to product cost of sales in the Condensed Consolidated Statement of Operations. The maintenance portion of the monthly invoices will be recognized as service income on a monthly basis.

The Company capitalized  $334,000  and $750,000 of such contract costs for the ABCR pilot program during the three- and nine-month periods ended September 30, 2010, respectively, and amortized $70,000 and $82,000 of such costs for the three- and nine-month periods ended September 30, 2010, respectively. As a result of the change in contractual terms on August 22, 2011, and the resultant change in the revenue recognition methodology, the unamortized deferred contract costs of approximately $1.1 million were charged to cost of product sales.

Deferred product costs consist of transportation asset management equipment costs deferred in accordance with our revenue recognition policy (see Note 6 to the Unaudited Condensed Consolidated Financial Statements).

Deferred costs consist of the following:

	December 31, 2010		September 30, 2011
Deferred contract costs	$	694,000	$	-
Deferred product costs		3,443,000		3,744,000
		4,137,000		3,744,000
Less: Current portion		1,159,000		1,503,000
	$	2,978,000	$	2,241,000