ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 11 — ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

On January 7, 2010, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with General Electric Capital Corporation (“GECC”) and GE Asset Intelligence, LLC (“GEAI”), pursuant to which the Company acquired GEAI’s telematics business (the “GEAI Business”) through the purchase of 100% of the membership interests of Asset Intelligence, LLC (“AI”), a newly formed, wholly owned subsidiary of GEAI into which substantially all of the assets, including intellectual property, and liabilities of the GEAI Business had been transferred immediately prior to the closing. Effective with the closing of the transaction, AI became a wholly owned subsidiary of the Company. In connection with the transaction, AI offered employment to all of the former employees of the GEAI Business. The focus of AI’s business is in trucking, rail, marine and intermodal applications. The acquisition has provided the Company with access to a broader base of customers.

Under the terms of the Purchase Agreement, the Company paid consideration of $15 million in cash at closing. In addition, the Company would have been required to pay additional cash consideration of up to $2 million in or about February, 2011, contingent upon the number of new units of telematics equipment sold or subject to a binding order to be sold by AI during the year ended December 31, 2010. The Company originally recorded in the preliminary purchase price allocation $1,017,000 of contingent consideration based on the estimated number of new units of telematics equipment expected to be sold in 2010. The contingent consideration was estimated using a probability-weighted calculation of the number of new units of telematics equipment expected to be sold in 2010 discounted at 20.5%, which represents the Company’s weighted-average discount rate. The contingent consideration was reversed during the second quarter of 2010 based on revised forecasts which indicated AI would not meet the required number of new unit sales during the measurement period in order for the contingent consideration to become payable.

The Company incurred acquisition-related expenses of approximately $1,355,000, of which $1,241,000 and $114,000 were included in selling, general and administrative expenses in 2009 and for the nine months ended September 30, 2010, respectively.

The transaction was accounted for using the acquisition method of accounting and the purchase price was assigned to the net assets acquired based on the fair value of such assets and liabilities at the date of acquisition. The following table summarizes the final allocation of the AI purchase price to the assets acquired and liabilities assumed at the date of acquisition:

Current assets, excluding inventory	$	4,709,000
Inventory		5,236,000
Other assets, net		3,218,000
Current liabilities		(5,746,000	)
Intangibles		6,365,000
Goodwill		1,218,000

Fair value of assets acquired	$	15,000,000

The goodwill arising from the acquisition consists largely of the synergies and cost reductions through economies of scale expected from combining the operations of the Company and AI. The goodwill is expected to be fully deductible for tax purposes.

The fair value of the current assets acquired included trade accounts receivable with a fair value of $3,272,000. The gross amount due was $3,966,000, of which $694,000 is expected to be uncollectible.

The results of operations of AI have been included in the condensed consolidated statement of operations as of the effective date of the acquisition.

The following revenue and operating loss of AI were included in the Company’s condensed consolidated results of operations for the three- and nine-month periods ended September 30, 2010:

	Three Months			Nine Months
	Ended			Ended
	September 30, 2010			September 30, 2010

Revenues	$	3,699,000		$	11,471,000
Operating loss		(434,000	)		(2,555,000	)

The following table represents the combined pro forma revenue and earnings for the nine-month period ended September 30, 2010:

				Nine Months
	Nine Months			Ended
	Ended			September 30, 2010
	September 30, 2010			Pro Forma
	Historical			Combined

Revenue	$	18,627,000		$	18,869,000
Net loss		(9,947,000	)		(9,878,000	)
Net loss per share — basic and diluted		(0.89	)		(0.88	)

There have been no changes in the carrying amount of goodwill from January 1, 2011 to September 30, 2011.

The following table summarizes intangible assets arising from the AI acquisition and previous acquisitions by the Company (namely, the acquisitions of PowerKey and Didbox Ltd.) as of December 31, 2010 and September 30, 2011:

September 30, 2011	Useful Lives (In Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Amortized:
Patents	11	$	1,489,000	$	(237,000	)	$	1,252,000
Tradename	5		200,000		(70,000	)		130,000
Non-competition agreement	3		234,000		(137,000	)		97,000
Technology	5		50,000		(19,000	)		31,000
Workforce	5		33,000		(12,000	)		21,000
Customer relationships	5		4,499,000		(1,577,000	)		2,922,000

			6,505,000		(2,052,000	)		4,453,000

Unamortized:
Customer list			104,000		—			104,000
Trademark and Tradename			135,000		—			135,000

			239,000		—			239,000

Total		$	6,744,000	$	(2,052,000	)	$	4,692,000

December 31, 2010	Useful Lives (In Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Amortized:
Patents	11	$	1,489,000	$	(135,000	)	$	1,354,000
Tradename	5		200,000		(40,000	)		160,000
Non-competition agreement	3		234,000		(78,000	)		156,000
Technology	5		50,000		(12,000	)		38,000
Workforce	5		33,000		(8,000	)		25,000
Customer relationships	5		4,499,000		(900,000	)		3,599,000

			6,505,000		(1,173,000	)		5,332,000
Unamortized:
Customer list			104,000		—			104,000
Trademark and Tradename			135,000		—			135,000

			239,000	$	—			239,000

Total		$	6,744,000	$	(1,173,000	)	$	5,571,000

Amortization expense for the three- and nine-month periods ended September 30, 2010 was $169,000 and $509,000, respectively, and for the three- and nine-month periods ended September 30, 2011 was $292,000 and $879,000, respectively. Future amortization expense for each of the five succeeding fiscal years for these intangible assets is as follows:

Year ending December 31:

October – December 2011	$	291,000
2012		1,170,000
2013		1,091,000
2014		1,086,000
2015		135,000

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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