Note B: Acquisitions

In June 2010, we purchased all of the outstanding equity of CitySync Limited, a privately-held developer and marketer of automatic number plate recognition (ANPR) products. As part of the purchase agreement, the sellers are eligible to receive an earn-out based on the performance of the business for the 18 months following the acquisition date. Earn-outs are calculated as of each calendar year end and paid within 90 days thereof. The earn-out is based on achieving certain revenue and minimum gross margins from the sale of CitySync ANPR systems and it is calculated in two separate periods, each ending on December 31. In each period there are two tiers and superior performance could lead to a total earn-out of $2 million or higher, as the earn-out is not capped. For 2010, the sellers earned $696,000 which was paid in March 2011. We monitor the estimated fair value of the 2011 earn-out and its associated recorded liability on a quarterly basis and have determined the estimate has not materially changed from the initial estimate. The determination of the fair value is based on a probabilistic calculation where we assign probabilities to achieving each of the tiers in the period.

The results of CitySync operations are included in the accompanying financial statements since the date of the acquisition. The pro forma results are not necessarily indicative of the results that would have been achieved had the CitySync acquisition taken place on January 1, 2009. The table below includes our results for the periods as shown and for CitySync based on a January fiscal year (in thousands, except per share data):

	Three-Months Ended	Six-Months Ended
	June 30, 2010	June 30, 2010
Total revenue	$ 7,543	$ 14,394
Net income	35	297
Net income per share:
Basic	$ 0.01	$ 0.07
Diluted	$ 0.01	$ 0.07