INVESTMENT IN THIRD PARTY

6 Months Ended

Jun. 30, 2011

Investments, All Other Investments [Abstract]

INVESTMENT IN THIRD PARTY [Text Block]

INVESTMENT IN THIRD PARTY:

On October 22, 2010, the Company made a $7.0 million equity investment in a privately held company, SemiSouth Laboratories (“SemiSouth”). The Company accounts for its non-marketable investment in SemiSouth under the cost method as the Company has less than a 20% ownership interest in SemiSouth and does not have the ability to exercise significant influence over the investee. Also in October 2010, the Company paid $10.0 million as a prepaid royalty in exchange for the right to use SemiSouth's technology. The Company will amortize the royalty to cost of revenues based on the Company's sales of products incorporating the licensed technology. The company does not expect to amortize the prepaid royalty within the current year.

The Company accounts for its non-marketable investment in SemiSouth Laboratories under the cost method.  The investment is periodically reviewed for other-than-temporary declines in fair value by considering available evidence, including general market conditions, the company's financial condition, pricing in recent rounds of financing, earnings and cash flow forecasts, recent operational performance and any other readily available market data.  The carrying value of the Company's investment in SemiSouth is $7.0 million and was classified within other assets on the Company's condensed consolidated balance sheet as of June 30, 2011.

The Company's agreement with SemiSouth, entered into in 2010 provides, among other things, that the Company has the option to acquire SemiSouth in the future (“Call Option”) and the Company may be obligated to acquire SemiSouth at a future date if SemiSouth achieves certain financial performance conditions (“Put Option”).

The Call Option can be exercised by the Company at a multiple of SemiSouth's annualized net operating profits after tax (based on the average of such measures during certain months), as defined in the agreement (“NOPAT”). The multiple is intended to result in an acquisition price equal to the estimated fair value of SemiSouth. The minimum acquisition price would be $36 million.

The Put Option can only be exercised by SemiSouth once certain revenue and profit metrics have been reached.  At that time, SemiSouth could obligate the Company to acquire SemiSouth at a multiple of SemiSouth's NOPAT. The multiple is intended to result in an acquisition price equal to the estimated fair value of SemiSouth. In order to reach the revenue and profit metrics required to exercise the Put Option, SemiSouth would need to increase its quarterly revenue to approximately 15 times the level of revenues in the second quarter of 2011. The Put Option terminates on June 30, 2013.

The NOPAT multiple was determined to reflect fair value based on the Market Approach using Level 2 inputs that are derived principally from observable market data by comparing multiples for similar publicly traded companies. Due to the fact that the strike price of the Call Option and Put Option is continually being adjusted to reflect the changes in the fair value of SemiSouth, neither the Put Option nor the Call Option are expected to have value.  Based on these factors, the fair value of the Put/Call Option was determined to be zero.

In July of 2011, the Call and Put Options exercise periods were extended and is now exercisable until the date that is 31 days following delivery to the Company of SemiSouth's financial statements for the quarter ending June 30, 2013. (See Note 19).