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For internal use software, costs incurred in the preliminary project stage of developing or acquiring internal use software are expensed as incurred. After the preliminary project stage is completed, management has approved the project and it is probable that the project will be completed and the software will be used for its intended purpose, we capitalize certain internal and external costs incurred to acquire or create internal use software, principally related to software coding, designing system interfaces and installation and testing of the software. We amortize capitalized internal use software costs using the straight-line method over the estimated useful life of the software, generally from three to seven years. For software embedded in our products we capitalize software development costs when project technological feasibility is established and conclude capitalization when the hardware is ready for release. We amortize capitalized costs for software to be sold using the straight-line method over the estimated useful life of the software, generally from three to seven years. Software development costs incurred prior to the establishment of technological feasibility are expensed as incurred as engineering and development.</div> </div> 300000 400000 244000 66665 5.26 5.62 5.51 4874 18770000 15726000 19215000 43000 80000 103000 101000 165000 205000 P3Y -100000 -100000 1100000 1300000 23285000 18563000 22022000 0.01 0.01 P10Y 2300000 300000 30000000 2187000 980000 P60D P90D P30D 52000 41000 -16000 928000 1730000 -1730000 100000 9000000 100000 2 2 P65M P60M 1.00 0.025 2.5 P12M 5000000 0.05 15000000 1000000 338000 295000 1 1 2 1 2 2 2 2 3 4 0.10 0.51 0.36 0.49 0.49 0.46 0.51 2060000 1880000 <div> NOTE E – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="30%"> </td> <td width="45%"> </td> <td width="4%"> </td> <td width="7%"> </td> <td width="4%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="45%" align="left"> </td> <td width="4%" align="center"> </td> <td width="19%" colspan="3" align="center">December 31,</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="45%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2011</td></tr> <tr valign="bottom"><td width="30%" align="left">Prepaid expenses</td> <td width="45%" align="left"> </td> <td width="4%" align="left"> </td> <td width="7%" align="right">545</td> <td width="4%" align="left"> </td> <td width="8%" align="right">766</td></tr> <tr valign="bottom"><td width="30%" align="left">Debt issuance costs</td> <td width="45%" align="left"> </td> <td width="4%" align="left"> </td> <td width="7%" align="right">80</td> <td width="4%" align="left"> </td> <td width="8%" align="right">43</td></tr> <tr valign="bottom"><td width="30%" align="left">Deferred costs</td> <td width="45%" align="left"> </td> <td width="4%" align="left"> </td> <td width="7%" align="right">804</td> <td width="4%" align="left"> </td> <td width="8%" align="right">52</td></tr> <tr valign="bottom"><td width="30%" align="left">Other</td> <td width="45%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="right">82</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">96</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="45%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="7%" align="right">1,511</td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">957</td></tr></table></div>   </div> P4Y P2Y <div> <table border="0" cellspacing="0"> <tr><td width="63%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="63%" align="left">Total minimum lease payments receivable </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">$ </td> <td style="border-top: #000000 1px solid;" width="11%" align="right">1,923 </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">$ </td> <td style="border-top: #000000 1px solid;" width="11%" align="right">697 </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Unearned income </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(82 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(34 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Present value of future minimum lease payments receivable </td> <td width="2%" align="left">  </td> <td width="11%" align="right">1,841 </td> <td width="2%" align="left">  </td> <td width="2%" align="left">  </td> <td width="11%" align="right">663 </td> <td width="2%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Less current portion </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(512 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(165 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Amounts due after one year </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">1,329 </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">498 </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">  </td></tr></table> </div> 56710000 57212000 65293000 500000 P10Y 800000 2700000 <div> NOTE P – SIGNIFICANT CUSTOMER, CONCENTRATION OF CREDIT RISK AND RELATED PARTIES For the year ended December 31, 2012 and 2011, there were no customers that accounted for 10% or more of consolidated revenue. At December 31, 2012, one customer accounted for 19% of outstanding accounts receivable. The amount owed by this customer at December 31, 2012 was $1.9 million and was subsequently received on January 4, 2013. There were no customers that accounted for more than 10% of accounts receivable at December 31, 2011. We had two suppliers from which our purchases were 49% of our hardware cost of sales and two suppliers from which our purchases were 51% of our service cost of sales for the year ended December 31, 2012. Our accounts payable to these suppliers was $3.2 million at December 31, 2012. We had one supplier from which our purchases were 36% of our hardware cost of sales and two suppliers from which our purchases were 46% of our service cost of sales for the year ended December 31, 2011. Our accounts payable to these suppliers was $1.7 million at December 31, 2011. We had two suppliers from which our purchases were 51% of our hardware cost of sales and two suppliers from which our purchases were 49% of our service cost of sales for the year ended December 31, 2010. Related parties that we conducted business with include the law firm of Salisbury & Ryan LLP and Mr. E. James Constantine. Mr. Ryan, a member of our Board of Directors, is a partner in the law firm of Salisbury & Ryan LLP. Salisbury & Ryan LLP provides legal services to us. Mr. Constantine is also a member of our board of directors and during the year ended December 31, 2012 provided limited consulting services to us. During the year ended December 31, 2012, 2011 and 2010, Salisbury & Ryan LLP charged legal fees of $138,000, $134,000 and $361,000, respectively. Our accounts payable to Salisbury & Ryan LLP was $19,000 and $20,000 at December 31, 2012 and 2011, respectively. During the year ended December 31, 2012, Mr. Constantine charged consulting fees of $45,000. We had no amounts due to Mr. Constantine at December 31, 2012 or 2011. </div> 3388000 4506000 200000 45000 879000 879000 187000 187000 77000 59000 29000 117000 117000 2023 2012 1202000 1202000 12300000

8239000

7679000

1700000

20000

3200000

19000

6464000

9096000

6846000

9381000

6846000

9381000

809000

333000

12811000

1184000

-13000

-8000

P5Y10M17D

P6Y1M6D

P2Y7M28D

P1Y10M17D

66634000

68072000

938000

951000

1146000

<div> <div> Advertising Expenses Advertising expenses are charged to operations in the period in which they are incurred. For the years ended December 31, 2012, 2011 and 2010, advertising costs were approximately $0.8 million, $0.7 million and $0.9 million, respectively.</div> </div>

900000

700000

800000

900000

1200000

1400000

<div> <table border="0" cellspacing="0"> <tr><td width="70%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="70%" align="left"> </td> <td width="28%" colspan="6" align="center">December 31,</td></tr> <tr valign="bottom"><td style="text-indent: 35px;" width="70%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="14%" colspan="3" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="14%" colspan="3" align="center">2011</td></tr> <tr valign="bottom"><td width="70%" align="left">Accounts receivable</td> <td width="2%" align="left">$</td> <td width="10%" align="right">9,096</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="10%" align="right">6,464</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="70%" align="left">Unbilled accounts receivable</td> <td width="2%" align="left"> </td> <td width="10%" align="right">668</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="10%" align="right">618</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="70%" align="left">Allowance for doubtful accounts</td> <td width="2%" align="left"> </td> <td width="10%" align="right">(383</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="10%" align="right">(236</td> <td width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="70%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="10%" align="right">9,381</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="10%" align="right">6,846</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td></tr></table> </div>

236000

383000

236000

383000

100000

2500000

2400000

2700000

1500000

500000

400000

61428000

47985000

1779000

11664000

72147000

58460000

2120000

11567000

24793000

23855000

<div> <div> Basis of Presentation The consolidated financial statements include the results of operations and financial position of Numerex and its wholly owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Intercompany accounts and transactions have been eliminated in consolidation.</div> </div>

2000000

200000

900000

1900000

4400000

100000

41521

4376000

46000

665000

2600000

2580000

1241000

211000

748000

215000

900000

1000000

1700000

900000

200000

237000

881000

800000

697000

1923000

547000

342000

481000

553000

5306000

10251000

9547000

4948000

4945000

-704000

-4599000

<div> <div> Cash and Cash Equivalents We consider all investments with an original maturity of three months or less at date of purchase to be cash equivalents. Cash equivalents consist of overnight repurchase agreements and amounts on deposit in foreign banks. Cash of $0.4 million and $0.3 million at December 31, 2012 and 2011, respectively was held in foreign bank accounts.</div> </div>

<div> <div> Restricted Cash Cash of $0.2 million at December 31, 2011, was held in escrow related to a capital lease obligation. There was no restricted cash at December 31, 2012.</div> </div>

9500000

4100000

6.87

8.03

8.68

10.13

7.73

582166

338166

266627

<div> NOTE Q – COMMITMENTS AND CONTINGENCIES Capital Leases We occasionally enter into capital leases for equipment. For financial reporting purposes, minimum lease rentals relating to the equipment have been capitalized. The leased assets and obligations are recorded using our incremental borrowing rate at the inception of the lease. As of December 31, 2012, we had no outstanding capital leases. The cost of assets financed by a capital lease obligation was $0.9 million with a net book value of $0.8 million as of December 31, 2011. The term of the original lease expired in 2012. Obligations under capital leases were $0.2 million at December 31, 2011. Operating Leases We lease certain property and equipment under non-cancelable operating leases. The leases expire at various dates through 2022. Certain of our leases for office space have annual periods of free rent and escalation clauses of 2.5% to $1.00 per square foot. The leases also have options to renew for 60-65 months at the end of their terms. Rent expense, including short-term leases, amounted to approximately $1.2 million, $1.1 million and $1.0 million for the years ended December 31, 2012, 2011 and 2010, respectively Future minimum lease payments under such non-cancelable operating leases subsequent to December 31, 2012, are as follows (in thousands): <div> <table border="0" cellspacing="0"> <tr><td width="82%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="82%" align="left">Year Ending December 31, </td> <td width="3%" align="left">  </td> <td width="14%" align="left">  </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2013 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">545 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2014 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">1,070 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2015 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">1,103 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2016 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">1,127 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2017 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">994 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">Thereafter </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">5,070 </td></tr> <tr valign="bottom"><td width="82%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">9,909 </td></tr></table></div> </div>

30000

5000

30000

5000

16691

17171

15129

15609

-380000

1841000

7170000

<div> <div> Concentration of Credit Risk Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments and accounts receivable. We maintain our cash and overnight investment balances in financial institutions, which at times exceed federally insured limits. We had cash balances in excess of these limits of $4.1 million and $9.5 million at December 31, 2012 and 2011, respectively. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on cash and cash equivalents. Concentration of credit risk with respect to accounts receivable from customers is limited. We perform credit evaluations of prospective customers and we evaluate our trade receivables periodically. Our accounts receivable is at risk to the extent that we may not be able to collect from some of our customers. See Note P for more information.</div> </div>

13067000

15697000

18047000

749000

735000

676000

100000

52000

41000

-16000

-36000

55000

69000

36000

<div> NOTE L – DEBT On May 4, 2010, we and our subsidiaries entered into a Loan and Security Agreement (the "Loan Agreement") with Silicon Valley Bank (the "Bank"). On April 25, 2011, we, our subsidiaries and the Bank entered into an Amended and Restated Loan and Security Agreement in order to, among other things, increase the revolving line of credit from $5.0 million to $10.0 million. On November 5, 2012, we further amended our Loan and Security Agreement (the "Amended Loan Agreement") with the Bank. This amendment created a total loan facility of $19.8 million (the "Credit Facility") which included a $10.0 million acquisition line of credit (the "Acquisition Line"); a $5.0 million revolving line of credit and the conversion of existing borrowings from the Bank to a $4.8 million Term Loan. The revolving line of credit and the Term Loan are for working capital and general business requirements. The Acquisition Line is to finance permitted acquisitions which are defined as a similar line of business as us or a reasonable extension thereof. The amount available to us under the revolving line of credit and the acquisition line at any given time is the lesser of (a) $15.0 million or (b) the amount available under its borrowing base (two and half times Adjusted EBITDA (as defined in the Amended Loan Agreement), measured on a 12 month trailing average) minus (1) the dollar equivalent amount of all outstanding letters of credit plus an amount equal to the letter of credit reserve amount (as set forth in the Amended Loan Agreement), (2) 10% of each outstanding foreign exchange contract and (3) any amounts used for cash management service. We are obligated to repay the principal amount of the Term Loan in consecutive quarterly installments of $300,000 each. We must also repay 5% of the principal amount outstanding under the Acquisition Line on the first day of each calendar quarter. We had total available credit under the Credit Facility of $6.7 million. All unpaid principal and accrued interest on the Term Loan and the revolving line of credit is due and payable in full on April 25, 2015, which is the maturity date. The maturity date of the Acquisition Line is November 4, 2017. Our obligations under the Credit Facility are secured by substantially all of our assets and the assets of our subsidiaries, excluding our intellectual property except for the related the accounts and proceeds of such property. In addition, we are required to meet certain financial covenants customary with this type of facility, including maintaining a senior leverage ratio, a fixed charge coverage ratio and minimum liquidity availability. The Amended Loan Agreement contains customary events of default. If a default occurs and is not cured within any applicable cure period or is not waived, our obligations under the Credit Facility may be accelerated. In connection with our acquisition of a small technology company business in October 2012, we entered into a Promissory Note of $1.9 million payable to the sellers of the business. This promissory note bears interest at the greater of prime plus 1% or 4.25% (4.25% as of December 31, 2012) and is payable in monthly installments through September 2015. As of December 31, 2012, the balance outstanding on the Term Loan, Acquisition Line and the Promissory Note was $4.5 million, $2.0 million and $1.8 million, respectively. We were in compliance with all of the Bank's financial covenants at December 31, 2012 and there were no outstanding letters of credit. All outstanding amounts of principal and accrued interest on both the Term Loan and the Acquisition Line were repaid in January 2013 (See Note V). </div>

0.01

4800000

4500000

0.0425

52000

804000

-145000

-4424000

75000

302000

1317000

1824000

-9000

-364000

4319000

686000

368000

245000

4788000

-10000

1047000

10000

3741000

984000

12000

5818000

2365000

769000

1021000

-1917000

-53000

1394000

1372000

72000

64000

615000

451000

10385000

1662000

200000

0.5

0.33

0.06

124000

195000

3381000

3114000

3370000

3381000

900000

3114000

700000

3498000

700000

<div> NOTE N – SHARE-BASED COMPENSATION Compensation cost is recognized for all share-based payments granted and expected to vest and is based on the grant-date fair value estimated using the Black-Scholes option pricing model and a lattice model for awards with market conditions. Our determination of fair value of share-based payment awards on the date of grant using the option-pricing model is affected by our stock price, as well as our valuation assumptions. These variables primarily include our expected stock price volatility over the estimated life of the awards, and actual and projected employee stock option exercise behaviors. As employees vest in their awards, compensation cost is recognized over the requisite service period with an offsetting credit to additional paid-in capital. Share-based compensation expense is based on awards ultimately expected to vest and has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures are expected to differ from those estimates. Share-based compensation is adjusted based on actual forfeiture experience. For the years ended December 31, 2012, 2011 and 2010, share-based compensation expense was $1.4 million, $1.2 million and $0.9 million, respectively. We have outstanding stock options and stock appreciation rights granted pursuant to two stock option plans, the Long Term Incentive Plan (the "1999 Plan"), which was adopted in 1999, and the 2006 Long Term Incentive Plan (the "2006 Plan"), which was adopted in 2006. The 1999 Plan was terminated and replaced by the 2006 Plan. Stock options outstanding under the 1999 Plan remain in effect, but no new stock options may be granted under that plan. Stock options issued under the 2006 Plan and the 1999 Plan typically vest ratably over a four-year period and have a ten year term. During 2010, the Board of Directors and shareholders approved an amendment to the 2006 Plan, to (a) increase the maximum aggregate number of shares authorized for issuance under the 2006 Plan from 0.8 million shares to 1.5 million shares (in each case prior to taking into account provisions under the 2006 Plan allowing shares that were available under our predecessor stock incentive plan as of its termination date (and shares subject to stock options granted under the predecessor plan that expire or terminate without having been fully exercised) to be available again for issuance under the 2006 Plan) and (b) permit share settled stock appreciation rights (SARs) to be issued under the 2006 Plan. Under the 2006 Plan, a recipient of a stock appreciation right is generally entitled to receive, upon exercise and without payment to us (but subject to required tax withholdings), that number of shares having an aggregate fair market value as of the date of exercise not to exceed the number of shares subject to the portion of the SAR exercised, multiplied by an amount equal to the excess of (i) the fair market value per share on the date of exercise of the SAR over (ii) the fair market value per share on the date of grant of the SAR (or such amount in excess of the fair market value per share as the administrator may specify). The terms and conditions applicable to a SAR (including upon termination or change in the status of employment or service of the recipient with us and our subsidiaries) shall be determined by the administrator and set forth in the award agreement applicable to the SAR. The fair value of stock options and SARs at date of grant was estimated using the Black-Scholes option pricing model, and for grants that require achievement of market conditions, a lattice model with a Monte Carlo simulation. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires us to make certain assumptions with respect to selected model inputs. Expected stock price volatility was calculated based on the historical volatility of our common stock over the expected term of the option. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on employment termination behavior, as well as an analysis of actual option forfeitures. Dividend yield is zero as there are no payments of dividends made or expected. We consider the exercise behavior of past grants and model the pattern of aggregate exercises to estimate the expected term. <div>The assumptions to estimate the grant date fair value of stock options and SARs, including those with market conditions, granted for each of the three years in the period ended December 31, 2012 are summarized as follows:</div> <div> <table border="0" cellspacing="0"> <tr><td width="36%"> </td> <td width="20%"> </td> <td width="21%"> </td> <td width="21%"> </td></tr> <tr valign="bottom"><td width="36%" align="left"> </td> <td width="20%" align="center">December 31,</td> <td width="21%" align="center">December 31,</td> <td width="21%" align="center">December 31,</td></tr> <tr valign="bottom"><td width="36%" align="left">Assumptions:</td> <td style="border-bottom: #000000 1px solid;" width="20%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">2010</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Expected volatility</td> <td width="20%" align="right">69.8% - 72.4%</td> <td width="21%" align="right">66.6% - 77.1%</td> <td width="21%" align="right">72.5% - 80.3%</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Weighted-average volatility</td> <td width="20%" align="right">71.82%</td> <td width="21%" align="right">72.51%</td> <td width="21%" align="right">77.59%</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Expected dividends</td> <td width="20%" align="right">0%</td> <td width="21%" align="right">0%</td> <td width="21%" align="right">0%</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Expected term (in years)</td> <td width="20%" align="right">6.2– 6.3</td> <td width="21%" align="right">3.5 – 10.0</td> <td width="21%" align="right">4.0– 7.0</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Risk-free rate</td> <td width="20%" align="right">1.03%</td> <td width="21%" align="right">1.91%</td> <td width="21%" align="right">0.98%</td></tr></table></div>   A summary of stock option and SAR activity for the year ended December 31, 2012 follows: <div> <table border="0" cellspacing="0"> <tr><td width="51%"> </td> <td width="22%"> </td> <td width="4%"> </td> <td width="4%"> </td> <td width="16%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center">Weighted</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center">Average</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 1px solid;" align="center">Shares</td> <td style="border-bottom: #000000 1px solid;" align="center"> </td> <td style="border-bottom: #000000 1px solid;" align="center"> </td> <td style="border-bottom: #000000 1px solid;" align="center">Exercise Price</td></tr> <tr valign="bottom"><td align="left">Outstanding, January 1, 2012</td> <td align="right">2,224,743</td> <td align="left"> </td> <td align="left">$</td> <td align="right">5.55</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards granted</td> <td align="right">228,000</td> <td align="left"> </td> <td align="left"> </td> <td align="right">9.32</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards exercised</td> <td align="right">(638,011</td> <td align="left">)</td> <td align="left"> </td> <td align="right">4.16</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards forfeited</td> <td align="right">(135,750</td> <td align="left">)</td> <td align="left"> </td> <td align="right">7.31</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards expired</td> <td style="border-bottom: #000000 1px solid;" align="right">(16,500</td> <td style="border-bottom: #000000 1px solid;" align="left">)</td> <td style="border-bottom: #000000 1px solid;" align="left"> </td> <td style="border-bottom: #000000 1px solid;" align="right">10.00</td></tr> <tr valign="bottom"><td align="left">Outstanding, at December 31, 2012</td> <td style="border-bottom: #000000 1px solid;" align="right">1,662,482</td> <td style="border-bottom: #000000 1px solid;" align="left"> </td> <td style="border-bottom: #000000 1px solid;" align="left">$</td> <td style="border-bottom: #000000 1px solid;" align="right">6.37</td></tr> <tr valign="bottom"><td align="left">Exercisable at December 31, 2012</td> <td style="border-bottom: #000000 3px double;" align="right">958,521</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">6.21</td></tr></table></div>   As of December 31, 2012, stock options and SARs are further summarized as follows: <div> <table border="0" cellspacing="0"> <tr><td width="58%"> </td> <td width="5%"> </td> <td width="15%"> </td> <td width="5%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td width="5%" align="left"> </td> <td width="15%" align="center"> </td> <td width="5%" align="center"> </td> <td width="14%" align="center">Fully Vested</td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">Outstanding</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">and Exercisable</td></tr> <tr valign="bottom"><td width="58%" align="left">Total shares</td> <td width="5%" align="left"> </td> <td width="15%" align="right">1,662,482</td> <td width="5%" align="left"> </td> <td width="14%" align="right">958,521</td></tr> <tr valign="bottom"><td width="58%" align="left">Aggregate intrinsic value (in thousands)</td> <td width="5%" align="left">$</td> <td width="15%" align="right">11,251</td> <td width="5%" align="left">$</td> <td width="14%" align="right">7,252</td></tr> <tr valign="bottom"><td width="58%" align="left">Weighted-average remaining</td> <td width="5%" align="left"> </td> <td width="15%" align="left"> </td> <td width="5%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">contractual term (years)</td> <td width="5%" align="left"> </td> <td width="15%" align="right">5.7</td> <td width="5%" align="left"> </td> <td width="14%" align="right">4.4</td></tr></table></div>   <div> <div> We issued SARs for a total of 50,000 shares during the year ended December 31, 2012 with annual stock price targets and time-based vesting over four years. As of December 31, 2012, stock options and SARs with annual stock price targets have been issued and are outstanding for a total of 352,000 shares, of which 136,250 are exercisable. The weighted average grant-date fair value of stock options and SARs granted during the years ended December 31, 2012, 2011 and 2010 was $5.99, $4.47 and $2.92, respectively. The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2012, 2011 and 2010 was $4.0 million, $0.4 million and $0.2 million, respectively. During 2010, we issued approximately 3,000 shares of common stock in exchange for stock options to purchase 25,000 shares of common stock in connection with the cashless exercise of stock options with an exercise price of $7.38 per share and based on the market value of our common stock of $8.83 per share. During 2011, we issued approximately 2,000 shares of common stock in exchange for stock options to purchase approximately 6,000 shares of common stock in connection with the cashless exercise of stock options with an average exercise price of $7.40 per share and based on the market value of our common stock of $9.74 per share. During 2012, we issued approximately 278,000 shares of common stock in exchange for stock options and SARs to purchase approximately 608,000 shares of common stock in connection with the cashless exercise of stock options and SARs with an average exercise price of $4.17 per share and based on the weighted-average market value of our common stock of $10.21 per share. We issued non-vested restricted shares to independent directors under the 2006 Plan. We recognize the expense associated with shares over the one year vesting term. The expense is based on the fair market value of the shares awarded at the date of grant, times the number of shares awarded. A summary of restricted non-vested share activity for the year ended December 31, 2012 is as follows:</div> <table border="0" cellspacing="0"> <tr><td width="57%"> </td> <td width="15%"> </td> <td width="3%"> </td> <td width="6%"> </td> <td width="17%"> </td></tr> <tr valign="bottom"><td width="57%" align="left">Outstanding, as of January 1, 2012</td> <td width="15%" align="right">50,711</td> <td width="3%" align="left"> </td> <td width="6%" align="left">$</td> <td width="17%" align="right">9.40</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="57%" align="left">Granted</td> <td width="15%" align="right">54,000</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="17%" align="right">8.92</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="57%" align="left">Vested</td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">(50,711</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="17%" align="right">9.40</td></tr> <tr valign="bottom"><td width="57%" align="left">Outstanding, as of December 31, 2012</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">54,000</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="17%" align="right">8.92</td></tr></table></div>   The total fair value of the non-vested restricted stock that vested during the year ended December 31, 2012 was $0.5 million as of the vesting date. No shares vested prior to the year ended December 31, 2012. As of December 31, 2012, total unrecognized compensation costs related to all unvested share-based compensation was $2.9 million, expected to be recognized over a weighted-average period of 1.4 years. </div>

-0.03

0.12

0.46

-0.03

0.12

0.45

<div> <div> Earnings (Loss) Per Share Basic earnings (loss) per common share available to common shareholders is based on the weighted-average number of common shares outstanding excluding the dilutive impact of common stock equivalents. For periods in which we have net income, we base diluted net earnings per share on the weighted-average number of common shares outstanding and dilutive potential common shares, such as dilutive employee stock options and stock appreciation rights. See Note S for additional information.</div> </div>

<div> NOTE S – EARNINGS (LOSS) PER SHARE Basic earnings (loss) per common share available to common shareholders is based on the weighted-average number of common shares outstanding excluding the dilutive impact of common stock equivalents. For periods in which we have net income, we compute diluted net earnings per share on the weighted-average number of common shares outstanding and dilutive potential common shares, such as dilutive employee stock options and SARs. The numerator in calculating both basic and diluted income per common share for each period is the same as net income (loss). The denominator is based on the number of common shares as shown in the following table: <div> <table border="0" cellspacing="0"> <tr><td width="54%"> </td> <td width="5%"> </td> <td width="10%"> </td> <td width="4%"> </td> <td width="9%"> </td> <td width="6%"> </td> <td width="6%"> </td> <td width="5%"> </td></tr> <tr valign="bottom"><td width="54%" align="left">(in thousands, except per share data)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="54%" align="left">Net earnings (loss)</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">7,165</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">1,854</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">(380</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">)</td></tr> <tr valign="bottom"><td width="54%" align="left">Common Shares:</td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="9%" align="left"> </td> <td width="6%" align="left"> </td> <td width="6%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Weighted average common shares outstanding</td> <td width="5%" align="left"> </td> <td width="10%" align="right">15,412</td> <td width="4%" align="left"> </td> <td width="9%" align="right">15,055</td> <td width="6%" align="left"> </td> <td width="6%" align="right">15,084</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Dilutive effect of common stock equivalents</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">602</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="right">655</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">-</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Total</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">16,014</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">15,710</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">15,084</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left"> </td></tr> <tr><td width="99%" colspan="8"> </td></tr> <tr valign="bottom"><td width="54%" align="left">Net earnings (loss) per common share:</td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="9%" align="left"> </td> <td width="6%" align="left"> </td> <td width="6%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Basic</td> <td width="5%" align="left">$</td> <td width="10%" align="right">0.46</td> <td width="4%" align="left">$</td> <td width="9%" align="right">0.12</td> <td width="6%" align="left">$</td> <td width="6%" align="right">(0.03</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Diluted</td> <td width="5%" align="left">$</td> <td width="10%" align="right">0.45</td> <td width="4%" align="left">$</td> <td width="9%" align="right">0.12</td> <td width="6%" align="left">$</td> <td width="6%" align="right">(0.03</td> <td width="5%" align="left">)</td></tr></table></div>   For the years ended December 31, 2012, 2011 and 2010, 0.4 million, 0.5 million and 1.5 million, respectively, of stock options, SARs and warrants were not included in the computation of diluted earnings per share as their effect was anti-dilutive. </div>

0.34

-13000

2000

583000

429000

P1Y4M24D

1900000

0.190

0.06

0.92

0.02

0.05

0.90

0.05

0.10

0.88

0.02

<div> <div> Fair Value of Financial Instruments The hierarchy below lists three levels of fair value, which prioritizes the inputs used in the valuation methodologies, as follows: Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2—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. Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The fair value of financial instruments classified as current assets or liabilities, including cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate carrying value, principally because of the short-term, maturity of those items. The fair value of our capitalized lease obligation approximates carrying value based on the short-term maturity of the obligation. The fair value of our long-term notes receivable and payable approximates carrying value based on their effective interest rates compared to current market rates and similar type borrowing arrangements.</div> </div>

<div> <div> Financing Receivables Financing receivables are due in installments. We evaluate the credit quality of our financing receivables on an ongoing basis utilizing an aging of receivables and write-offs, customer collection experience, the customer's financial condition and known risk characteristics impacting the respective customer base, as well as existing economic conditions, to determine if an allowance is necessary. All amounts due at December 31, 2012 were deemed fully collectible and an allowance was not necessary.</div> </div>

<div> NOTE D – FINANCING RECEIVABLES We lease certain hardware devices to a small number of hardware distributors under sales-type leases expiring in various years through 2017. These receivables typically have terms from two to four years and bear interest at various rates. The devices are not functional without an active service agreement with us. Since we can de-activate devices for non-payment, we have established a history of successfully collecting amounts due under the original payment terms without making any concessions to customers. As a result, we satisfy the requirement of revenue recognition. In addition, our long-standing relationship with these customers supports our assertion that revenues are fixed and determinable and probable of collection. The components of these lease receivables were as follows: <div> <table border="0" cellspacing="0"> <tr><td width="63%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="63%" align="left">Total minimum lease payments receivable </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">$ </td> <td style="border-top: #000000 1px solid;" width="11%" align="right">1,923 </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">$ </td> <td style="border-top: #000000 1px solid;" width="11%" align="right">697 </td> <td style="border-top: #000000 1px solid;" width="2%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Unearned income </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(82 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(34 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Present value of future minimum lease payments receivable </td> <td width="2%" align="left">  </td> <td width="11%" align="right">1,841 </td> <td width="2%" align="left">  </td> <td width="2%" align="left">  </td> <td width="11%" align="right">663 </td> <td width="2%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Less current portion </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(512 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(165 </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Amounts due after one year </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">1,329 </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">498 </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">  </td></tr></table></div>   Future minimum lease payments to be received subsequent to December 31, 2012 are as follows (in thousands): <div> <table border="0" cellspacing="0"> <tr><td width="81%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="81%" align="left">2013 </td> <td width="3%" align="left">$ </td> <td width="14%" align="right">547 </td></tr> <tr valign="bottom"><td width="81%" align="left">2014 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">553 </td></tr> <tr valign="bottom"><td width="81%" align="left">2015 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">481 </td></tr> <tr valign="bottom"><td width="81%" align="left">2016 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">342 </td></tr> <tr valign="bottom"><td width="81%" align="left">Net lease receivable </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">1,923 </td></tr></table></div>   Our financing receivables are comprised of a single portfolio segment because of the small number of customers and the similar nature of the sales-type leasing arrangements. We evaluate the credit quality of financing receivables based on a combination of factors, including, but not limited to, customer collection experience, economic conditions, the customer's financial condition, and known risk characteristics impacting the respective customer base of our customers. In addition to specific account identification, we utilize historical collection experience from our population of similar customers to establish any allowance for credit losses. Financing receivables are placed in non-accrual status after 60 days of nonpayment and written off only after we have exhausted all collection efforts. We have been successful collecting financing receivables and consider the credit quality of such arrangements to be good, especially as the underlying service is required for functionality and can be deactivated for non-payment. We have not experienced any credit losses for any period in the three years ended December 31, 2012. Customer payments are considered past due if a scheduled payment is not received within contractually agreed upon terms. As of December 31, 2012, there were no financing receivables past due. </div>

20406000

221000

11232000

8023000

930000

13537000

294000

10870000

1848000

525000

3129000

400000

592000

725000

1564000

2342000

28694000

914000

14084000

11411000

2285000

24197000

1966000

13490000

6354000

2387000

8288000

693000

2852000

3388000

1355000

10660000

1672000

2620000

4506000

1862000

P7Y

P5Y

P12Y

P3Y

P7Y

P3Y

P7Y

P4Y

P20Y

P7Y

<div> <div> Foreign Currency Translation The assets and liabilities of our foreign operations are translated into U.S. dollars at the period end spot exchange rates, and revenues and expenses are translated at estimated average exchange rates for each period. Resulting translation adjustments are reflected as other comprehensive 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. Foreign operations are not significant to us for the years ended December 31, 2012, 2011 or 2010.</div> </div>

9473000

8859000

10395000

23787000

22838000

949000

26367000

25418000

949000

2580000

<div> <div> Goodwill and Intangible Assets Intangible assets consist of patents and acquired intellectual property, customer relationships and goodwill. These assets, except for goodwill, are amortized over their expected useful lives. Patents and acquired intellectual property are amortized using the straight-line method over 7 to 20 years, representing the shorter of their estimated useful lives or the period until the patent renews. Costs to maintain patents are expensed as incurred while costs to renew patents are capitalized and amortized over the remaining estimated useful lives. Customer relationships are amortized using the straight-line method over four to seven years. Goodwill and intangible assets with indefinite lives are not amortized but are subject to an annual impairment test, and more frequently if events or circumstances occur that would indicate a potential decline in their fair value. An impairment charge will be recognized only when the implied fair value of a reporting unit's goodwill is less than its carrying amount. The annual assessment of goodwill for impairment includes comparing the fair value of each reporting unit to the carrying value, referred to as step one. If the fair value of a reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is necessary. If the carrying value of a reporting unit exceeds its fair value, a second test is performed, referred to as step two, to measure the amount of impairment to goodwill, if any. To measure the amount of any impairment, we determine the implied fair value of goodwill in the same manner as if it were acquiring the affected reporting unit in a business combination. Specifically, we allocate the fair value of the affected reporting unit to all of the assets and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the implied fair value of goodwill. If the implied fair value of goodwill is less than the goodwill recorded on the consolidated balance sheet, an impairment charge for the difference is recorded. We base the impairment analysis of goodwill on estimated fair values. The assumptions, inputs and judgments used in performing the valuation analysis are inherently subjective and reflect estimates based on known facts and circumstances at the time the valuation is performed. These estimates and assumptions primarily include, but are not limited to, discount rates; terminal growth rates; projected revenues and costs; projected earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, for expected cash flows; and capital expenditure forecasts. We perform our annual goodwill impairment test as of December 31 absent any impairment indicators or other changes that may cause more frequent analysis. We did not identify an impairment as a result of our annual impairment test and none of the reporting units were at risk of failing step one. In addition, we assess on a quarterly basis whether any events have occurred or circumstances have changed that would indicate an impairment could exist.</div> </div>

25657000

24873000

784000

26202000

25789000

413000

28802000

28030000

772000

<div> <div> Impairment of Long-lived Assets Long-lived assets, such as property and equipment, and intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount which the carrying amount of the asset exceeds the fair value of the asset.</div> </div>

-524000

1798000

2356000

<div> NOTE J – INCOME TAXES The (benefit) provision for income taxes consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="44%"> </td> <td width="6%"> </td> <td width="9%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="9%"> </td> <td width="3%"> </td> <td width="6%"> </td> <td width="8%"> </td> <td width="5%"> </td></tr> <tr valign="bottom"><td width="44%" align="left"> </td> <td width="6%" align="left"> </td> <td width="45%" colspan="7" align="center">December 31,</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 16px;" width="44%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="44%" align="left">Current:</td> <td width="6%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Federal</td> <td width="6%" align="left">$</td> <td width="9%" align="right">(16</td> <td width="3%" align="left">)</td> <td width="7%" align="right">$</td> <td width="9%" align="right">41</td> <td width="3%" align="left"> </td> <td width="6%" align="left">$</td> <td width="8%" align="right">52</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">State</td> <td width="6%" align="left"> </td> <td width="9%" align="right">36</td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="right">69</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="right">55</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Foreign</td> <td width="6%" align="left"> </td> <td width="9%" align="right">-</td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="right">-</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="right">(36</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Reserve for Uncertain Tax Positions</td> <td width="6%" align="left"> </td> <td width="9%" align="right">(41</td> <td width="3%" align="left">)</td> <td width="7%" align="left"> </td> <td width="9%" align="right">(166</td> <td width="3%" align="left">)</td> <td width="6%" align="left"> </td> <td width="8%" align="right">(61</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td width="44%" align="left">Deferred:</td> <td width="6%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Federal</td> <td width="6%" align="left"> </td> <td width="9%" align="right">(4,424</td> <td width="3%" align="left">)</td> <td width="7%" align="left"> </td> <td width="9%" align="right">-</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="right">(145</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">State</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="right">(364</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(9</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">)</td></tr> <tr valign="bottom"><td width="44%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">(4,809</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="7%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">(56</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">(144</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">)</td></tr></table></div>   <div> </div> Income taxes recorded by us differ from the amounts computed by applying the statutory U.S. federal income tax rate to income before income taxes. The following schedule reconciles income tax (benefit) provision at the statutory rate and the actual income tax expense as reflected in the consolidated statements of operations and comprehensive income (loss) for the respective periods: <div> <table border="0" cellspacing="0"> <tr><td width="45%"> </td> <td width="5%"> </td> <td width="12%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="10%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="4%"> </td></tr> <tr valign="bottom"><td width="45%" align="center">(in thousands)</td> <td width="5%" align="left"> </td> <td width="43%" colspan="7" align="center">December 31,</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 4px;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Income tax expense (benefit) computed at</td> <td width="5%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="left"> </td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">U.S. corporate tax rate of 34%</td> <td width="5%" align="left">$</td> <td width="12%" align="right">801</td> <td width="3%" align="left"> </td> <td style="text-indent: 4px;" width="5%" align="left">$</td> <td width="10%" align="right">611</td> <td width="3%" align="left"> </td> <td width="5%" align="left">$</td> <td width="5%" align="right">(178</td> <td width="4%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Adjustments attributable to:</td> <td width="5%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="left"> </td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Deferred balance true-up</td> <td width="5%" align="left"> </td> <td width="12%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">302</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">75</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Valuation allowance</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(5,544</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">(993</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="5%" align="right">631</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Federal alternative minimum tax</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(16</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">41</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">52</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">State income tax</td> <td width="5%" align="left"> </td> <td width="12%" align="right">36</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">69</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">145</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Foreign income tax</td> <td width="5%" align="left"> </td> <td width="12%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">(36</td> <td width="4%" align="left">)</td></tr> <tr><td width="97%" colspan="10"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Reserve for uncertain tax positions</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(41</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">(166</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="5%" align="right">(61</td> <td width="4%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Non-deductible expenses</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(55</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">80</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">153</td> <td width="4%" align="left"> </td></tr> <tr><td width="97%" colspan="10"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Tax goodwill</td> <td width="5%" align="left"> </td> <td width="12%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">(928</td> <td width="4%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Stock option shortfall</td> <td width="5%" align="left"> </td> <td width="12%" align="right">10</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">1</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Other</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="right">2</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">(4,809</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double; text-indent: 3px;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">(56</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">(144</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">)</td></tr></table></div>   The components of our net deferred tax assets and liabilities are as follows: <div> <table border="0" cellspacing="0"> <tr><td width="58%"> </td> <td width="4%"> </td> <td width="12%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="10%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td style="text-indent: 30px;" width="58%" align="left">(in thousands)</td> <td width="4%" align="left"> </td> <td width="30%" colspan="4" align="center">December 31,</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Current deferred tax asset (liability):</td> <td width="4%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Inventories</td> <td width="4%" align="left">$</td> <td width="12%" align="right">245</td> <td width="3%" align="left"> </td> <td width="5%" align="right">$</td> <td width="10%" align="right">368</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Accrued expenses</td> <td width="4%" align="left"> </td> <td width="12%" align="right">64</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">72</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Net operating loss carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">984</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Other</td> <td width="4%" align="left"> </td> <td width="12%" align="right">205</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">165</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Valuation allowance</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">(451</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">(615</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">1,047</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">(10</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr><td width="95%" colspan="7"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Non-current deferred tax asset (liability):</td> <td width="4%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Intangible assets</td> <td width="4%" align="left"> </td> <td width="12%" align="right">686</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">4,319</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Federal net operating loss carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">12</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">12</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Net operating loss carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">2,365</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">5,818</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Tax credit carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">1,372</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">1,394</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Difference between book and tax</td> <td width="4%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Basis of property</td> <td width="4%" align="left"> </td> <td width="12%" align="right">(53</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">(1,917</td> <td width="3%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Other</td> <td width="4%" align="left"> </td> <td width="12%" align="right">1,021</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">769</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Valuation allowance</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">(1,662</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">(10,385</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">3,741</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">10</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Net deferred tax assets</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">4,788</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td></tr></table></div>   <div> </div> During the year ended December 31, 2012, we determined that it would be more likely than not that the cumulative federal net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our sustained profitable operating performance over the past three years and continued expectations for future income. Accordingly, we released our valuation allowance against these items. We have maintained a valuation allowance against certain deferred tax assets that we determined we would more likely than not utilize before expiration. These deferred tax assets consist of certain state net operating losses, tax credits, and foreign net operating losses. As a result of the release of the valuation allowance we recognized a deferred tax benefit of $4.8 million. Net operating loss carry forwards available at December 31, 2012, expire as follows: <div> <table border="0" cellspacing="0"> <tr><td width="64%"> </td> <td width="6%"> </td> <td width="13%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td style="text-indent: 30px;" width="64%" align="left">(in thousands)</td> <td width="6%" align="left"> </td> <td width="13%" align="center"> </td> <td width="15%" align="center">Year of</td></tr> <tr valign="bottom"><td width="64%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Amount</td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">Expiration</td></tr> <tr><td width="98%" colspan="4"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Federal net operating losses</td> <td style="text-indent: 1px;" width="6%" align="left">$</td> <td width="13%" align="right">2,891</td> <td width="15%" align="center">2021-2029</td></tr> <tr valign="bottom"><td width="64%" align="left">State net operating losses</td> <td width="6%" align="left"> </td> <td width="13%" align="right">52,353</td> <td width="15%" align="center">2017-2030</td></tr> <tr valign="bottom"><td width="64%" align="left">Minimum tax credit carry forward</td> <td width="6%" align="left"> </td> <td width="13%" align="right">814</td> <td width="15%" align="center">n/a</td></tr> <tr valign="bottom"><td width="64%" align="left">General business credit carry forward</td> <td width="6%" align="left"> </td> <td width="13%" align="right">559</td> <td width="15%" align="center">2012-2023</td></tr></table></div>   We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2009 through 2011 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from years in which net operating losses have arisen are still open for examination by the tax authorities. </div>

77000

219000

175000

2011

2009

-144000

-56000

-4809000

-144000

-56000

-4809000

<div> <div> Income Taxes We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applied to taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets when it is more likely than not that the asset will not be realized. We evaluate liabilities for uncertain tax positions and, as of December 31, 2012, we recorded a net decrease to the liability for unrecognized tax benefits of less than $0.1 million recorded in general and administrative expense. This amount is made up of an accrual of interest and penalties related to state tax exposure in prior years and tax benefit recognized on the settlement of certain state tax exposure. Our total unrecognized tax benefits as of December 31, 2012 were approximately $0.2 million inclusive of interest and penalties of less than $0.1 million. We anticipate a decrease to the balance of total unrecognized tax benefits within the next twelve months of approximately $0.1 million. If we were to recognize these tax benefits, all of the benefit would favorably impact the effective tax rate. The following table summarizes the activity related to our unrecognized tax benefits, net of federal benefit, and excludes interest and penalties: <div> <table border="0" cellspacing="0"> <tr><td width="63%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="8%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td style="text-indent: 27px;" width="63%" align="left">(in thousands) </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center">  </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="left">2011 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Balance at January 1 </td> <td style="text-indent: 1px;" width="7%" align="left">$ </td> <td width="8%" align="right">189 </td> <td width="3%" align="left">  </td> <td width="3%" align="left">$ </td> <td width="8%" align="right">283 </td> <td width="3%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Decreases as a result of positions taken during prior periods </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(30 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(94 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Balance at December 31 </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">159 </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">189 </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">  </td></tr></table></div> We conduct business globally and, as a result, file income tax returns in the United States and in many state and foreign jurisdictions. We are subject to state and local income tax examinations for years after and including 1998. These tax years remain open due to the net operating losses generated in these years that have not been utilized as of the year ended December 31, 2012. Likewise, the existence of net operating losses from earlier periods could subject us to United States federal income tax examination for years including and after 2001, since such net operating losses have not been utilized as of the year ended December 31, 2012. Our 2007 U.S. federal return was audited by the Internal Revenue Service and the examination was concluded in March 2010 with a minor increase to the federal alternative minimum tax liability.</div> </div>

631000

-993000

-5544000

-36000

-178000

611000

801000

153000

80000

-55000

1000

10000

2000

145000

69000

36000

-61000

-166000

-41000

365000

1042000

3968000

1619000

732000

-762000

-421000

-56000

-59000

154000

4788000

603000

-547000

-47000

-1286000

2320000

550000

400000

182000

-849000

-240000

372000

2122000

32000

<div> <div> NOTE H INTANGIBLE ASSETS Intangible Assets Other Than Goodwill <div> <table border="0" cellspacing="0"> <tr><td width="21%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="40%" colspan="8" align="center">December 31, 2012</td> <td style="border-bottom: #000000 1px solid;" width="32%" colspan="7" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="8%" align="center">Weighted</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Gross</td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Gross</td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="8%" align="center">Average</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Carrying</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Accumulated</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Net Book</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Carrying</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Accumulated</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Net Book</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Useful Lives</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amount</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amortization</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 6.6pt;" width="8%" align="center">Value</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amount</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amortization</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Value</td></tr> <tr valign="bottom"><td width="21%" align="left">Purchased and developed software</td> <td width="8%" align="right">2.66</td> <td width="2%" align="left">$</td> <td width="8%" align="right">6,354</td> <td width="2%" align="right">$</td> <td width="8%" align="right">(1,848</td> <td width="2%" align="left">)</td> <td width="2%" align="right">$</td> <td width="8%" align="right">4,506</td> <td width="2%" align="left">$</td> <td width="8%" align="right">11,411</td> <td style="text-indent: 12.6pt;" width="2%" align="left">$</td> <td width="8%" align="right">(8,023</td> <td width="2%" align="left">)</td> <td width="2%" align="left">$</td> <td width="8%" align="right">3,388</td></tr> <tr valign="bottom"><td width="21%" align="left">Patents, trade and service marks</td> <td width="8%" align="right">6.10</td> <td width="2%" align="left"> </td> <td width="8%" align="right">13,490</td> <td width="2%" align="right"> </td> <td width="8%" align="right">(10,870</td> <td width="2%" align="left">)</td> <td width="2%" align="right"> </td> <td width="8%" align="right">2,620</td> <td width="2%" align="left"> </td> <td width="8%" align="right">14,084</td> <td width="2%" align="left"> </td> <td width="8%" align="right">(11,232</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="8%" align="right">2,852</td></tr> <tr valign="bottom"><td width="21%" align="left">Customer relationships</td> <td width="8%" align="right">5.48</td> <td width="2%" align="left"> </td> <td width="8%" align="right">1,966</td> <td width="2%" align="right"> </td> <td width="8%" align="right">(294</td> <td width="2%" align="left">)</td> <td width="2%" align="right"> </td> <td width="8%" align="right">1,672</td> <td width="2%" align="left"> </td> <td width="8%" align="right">914</td> <td width="2%" align="left"> </td> <td width="8%" align="right">(221</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="8%" align="right">693</td></tr> <tr valign="bottom"><td width="21%" align="left">Other intangible assets</td> <td width="8%" align="right">1.88</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">2,387</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="right"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(525</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="right"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">1,862</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">2,285</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(930</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">1,355</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="8%" align="left"> </td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">24,197</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="right">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">(13,537</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="right">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">10,660</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">28,694</td> <td style="border-bottom: #000000 2px solid; text-indent: 12.6pt;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">(20,406</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">8,288</td></tr></table></div>   We did not incur costs to renew or extend the term of acquired intangible assets during the year ended December 31, 2012. During the year ended December 31, 2012, we wrote off $9.0 million of fully amortized intangible assets. Amortization of intangible assets for the years ended December 31, 2012, 2011 and 2010 was $2.7 million, $2.4 million, and $2.5 million, respectively. In addition, $0.1 million of amortization of intangible assets is recorded in cost of subscription revenue in the accompanying consolidate statement of operations and comprehensive income (loss) for the year ended December 31, 2012. No amortization was recorded in cost of sales for the years ended December 31, 2011 or 2010. At December 31, 2012 and 2011, we have capitalized approximately $1.7 million and $1.0 million, respectively of internally generated software development costs. Amortization of capitalized software development costs for the years ended December 31, 2012, 2011 and 2010 was $1.0 million, $1.0 million and $0.9 million, respectively included in total amortization disclosed above. We expect amortization expense for the next five years to be as follows based on intangible assets as of December 31, 2012 (in thousands): <div> <table style="width: 328px; height: 136px;" border="0" cellspacing="0"> <tr><td width="44%"> </td> <td width="5%"> </td> <td width="50%"> </td></tr> <tr valign="bottom"><td style="text-indent: 0pt;" width="44%" align="right">2013</td> <td width="5%" align="right">$</td> <td width="50%" align="right">3,129</td></tr> <tr valign="bottom"><td width="44%" align="right">2014</td> <td width="5%" align="right"> </td> <td width="50%" align="right">2,342</td></tr> <tr valign="bottom"><td width="44%" align="right">2015</td> <td width="5%" align="right"> </td> <td width="50%" align="right">1,564</td></tr> <tr valign="bottom"><td width="44%" align="right">2016</td> <td width="5%" align="right"> </td> <td width="50%" align="right">725</td></tr> <tr valign="bottom"><td width="44%" align="right">2017</td> <td width="5%" align="right"> </td> <td width="50%" align="right">592</td></tr></table></div>   Goodwill The carrying amount of goodwill for each of the two years for the period ended December 31, 2012 is as follows (in thousands): <div> <table border="0" cellspacing="0"> <tr><td width="62%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="10%"> </td></tr> <tr valign="bottom"><td width="62%" align="left"> </td> <td width="2%" align="left"> </td> <td width="10%" align="center"> </td> <td width="2%" align="center"> </td> <td width="11%" align="center">Other</td> <td width="2%" align="center"> </td> <td width="10%" align="center"> </td></tr> <tr valign="bottom"><td width="62%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">M2M</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Services</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">Total</td></tr> <tr valign="bottom"><td width="62%" align="left">Balance January 1, 2011 and 2012</td> <td width="2%" align="left">$</td> <td width="10%" align="right">22,838</td> <td width="2%" align="left">$</td> <td width="11%" align="right">949</td> <td width="2%" align="left">$</td> <td width="10%" align="right">23,787</td></tr> <tr valign="bottom"><td width="62%" align="left">Acquired goodwill, year ended December 31, 2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">2,580</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">2,580</td></tr> <tr valign="bottom"><td width="62%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">25,418</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">949</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">26,367</td></tr></table></div>   During 2012, we added $2.6 million of goodwill through the acquisition of a small technology business on October 1, 2012 (see Note B for additional information). During 2012 and 2011, we prepared an analysis using standard modeling techniques to estimate fair market value for each of the three reporting units with goodwill: Wireless (excluding Orbit One), Satellite (Orbit One) and BNI Products and Services. This analysis included a combination of a discounted cash flow models and, where available, the use of public company market comparables in similar industries. We have not recorded any goodwill or long-lived intangible asset impairment losses for the years ended December 31, 2011 and 2012.</div> </div>

4901000

6154000

93000

214000

337000

500000

58000

169000

271000

578000

362000

<div> NOTE F – INVENTORY Inventory consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="30%"> </td> <td width="36%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="6%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="36%" align="left"> </td> <td width="7%" align="left"> </td> <td width="23%" colspan="4" align="center">December 31,</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="36%" align="center">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Raw materials</td> <td width="36%" align="left"> </td> <td width="7%" align="left">$</td> <td width="8%" align="right">922</td> <td width="2%" align="left"> </td> <td width="7%" align="left">$</td> <td width="6%" align="right">1,290</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Work-in-progress</td> <td width="36%" align="left"> </td> <td width="7%" align="left"> </td> <td width="8%" align="right">6</td> <td width="2%" align="left"> </td> <td width="7%" align="left"> </td> <td width="6%" align="right">14</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Finished goods</td> <td width="36%" align="left"> </td> <td width="7%" align="left"> </td> <td width="8%" align="right">6,937</td> <td width="2%" align="left"> </td> <td width="7%" align="left"> </td> <td width="6%" align="right">6,331</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Reserve for obsolesence</td> <td width="36%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(362</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">(578</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="36%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">7,503</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">7,057</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table></div>   </div>

6331000

6937000

7057000

7503000

<div> <div> Inventories and Reserves for Excess, Slow-Moving and Obsolete Inventory Inventories, valued at the lower of cost or market, consist of: i) Cellular M2M Modems & Modules, ii) Security devices and iii) Satellite M2M Modems. Cost is generally determined on the first-in, first-out (FIFO) basis. We include raw material freight costs to manufacturers in inventory and these costs are recognized in cost of sales when the product is sold. Lower of cost or market value of inventory is determined at the operating unit level and evaluated periodically. Estimates for obsolescence or slow moving inventory are maintained based on current economic conditions, historical sales quantities and patterns and, in some cases, the specific risk of loss on specifically identified inventories. Such inventories are recorded at estimated realizable value net of the costs of disposal.</div> </div>

1290000

922000

578000

362000

14000

6000

185000

83000

148000

522000

3025000

338000

<div> NOTE T – LEGAL PROCEEDINGS As of December 31, 2012, we were not involved in any pending material litigation. Litigation settlement and related expenses are summarized as follows: <div> <table border="0" cellspacing="0"> <tr><td width="47%"> </td> <td width="7%"> </td> <td width="11%"> </td> <td width="7%"> </td> <td width="10%"> </td> <td width="6%"> </td> <td width="12%"> </td></tr> <tr valign="bottom"><td width="47%" align="left"> </td> <td width="7%" align="left"> </td> <td width="46%" colspan="5" align="center">For the years ended December 31,</td></tr> <tr valign="bottom"><td style="text-indent: 21px;" width="47%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2010</td></tr> <tr valign="bottom"><td width="47%" align="left">Accrued litigation settlement</td> <td width="7%" align="left">$</td> <td style="text-indent: 1px;" width="11%" align="right">-</td> <td width="7%" align="left">$</td> <td style="text-indent: 10px;" width="10%" align="right">-</td> <td width="6%" align="left">$</td> <td width="12%" align="right">1,730</td></tr> <tr valign="bottom"><td width="47%" align="left">Legal fees associated w/ litigation</td> <td width="7%" align="left"> </td> <td style="text-indent: 1px;" width="11%" align="right">-</td> <td width="7%" align="left"> </td> <td style="text-indent: 9px;" width="10%" align="right">338</td> <td width="6%" align="left"> </td> <td width="12%" align="right">1,000</td></tr> <tr valign="bottom"><td width="47%" align="left">Other (underwriting/accounting)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 1px;" width="11%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 10px;" width="10%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">295</td></tr> <tr valign="bottom"><td width="47%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="11%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double; text-indent: 9px;" width="10%" align="right">338</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">3,025</td></tr></table></div>   </div>

17231000

19342000

61428000

72147000

12385000

12655000

2000000

10000000

19800000

10000000

5000000

6700000

300000

3025000

338000

34000

82000

663000

1841000

<div> NOTE C – ACCOUNTS RECEIVABLE Accounts receivables and related allowance for doubtful accounts consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="70%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="70%" align="left"> </td> <td width="28%" colspan="6" align="center">December 31,</td></tr> <tr valign="bottom"><td style="text-indent: 35px;" width="70%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="14%" colspan="3" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="14%" colspan="3" align="center">2011</td></tr> <tr valign="bottom"><td width="70%" align="left">Accounts receivable</td> <td width="2%" align="left">$</td> <td width="10%" align="right">9,096</td> <td width="2%" align="left"> </td> <td width="2%" align="left">$</td> <td width="10%" align="right">6,464</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="70%" align="left">Unbilled accounts receivable</td> <td width="2%" align="left"> </td> <td width="10%" align="right">668</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="10%" align="right">618</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="70%" align="left">Allowance for doubtful accounts</td> <td width="2%" align="left"> </td> <td width="10%" align="right">(383</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="10%" align="right">(236</td> <td width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="70%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="10%" align="right">9,381</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="10%" align="right">6,846</td> <td style="border-bottom: #000000 3px double; border-top: #000000 1px solid;" width="2%" align="left"> </td></tr></table></div>   </div>

4500000

6008000

0.20

-998000

3544000

150000

-2612000

-3041000

-6452000

8555000

-1194000

1701000

-380000

1854000

7165000

<div> <div> Recent Accounting Pronouncements In May 2011, the Financial Accounting Standards Board ("FASB") issued new accounting guidance related to convergence between U.S. GAAP and International Financial Reporting Standards ("IFRS"). The new guidance changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. The new guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact on our fair value measurements, financial condition, results of operations or cash flows. In June 2011, the FASB issued new accounting guidance related to the presentation of comprehensive income. The new guidance will require the presentation of components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. There is no change to the items that we must report in other comprehensive income or when we must reclassify an item of other comprehensive income to net income. In December 2011, FASB issued guidance which indefinitely defers the guidance related to the presentation of reclassification adjustments. The guidance is effective for interim and annual periods beginning after December 15, 2011. We adopted this new accounting guidance during the first quarter of 2012 and because the guidance impacts presentation only, it had no effect on our financial condition, results of operations or cash flows. In September 2011, the FASB issued new accounting guidance which allows an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment. An entity will be required to perform the two-step impairment test only if it concludes, based on a qualitative assessment, the fair value of a reporting unit is more likely than not to be less than its carrying value. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption had no impact on our financial condition or results of operations. In July 2012, the FASB issued new accounting guidance that allows an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived asset is impaired for determining whether it is necessary to perform the quantitative impairment test. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. Adoption is not expected to have an impact on our financial condition or results of operations. In February 2013, the FASB issued an update to the accounting standards to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This update is effective prospectively for reporting periods beginning after December 15, 2012. Adoption is not expected to have an impact on our financial condition or results of operations. In March 2013, the FASB issued an update to the accounting standards to clarify the applicable guidance for a parent company's accounting for the release of the cumulative translation adjustment into net income upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. This guidance is effective for fiscal periods beginning after December 15, 2013, and is to be applied prospectively to derecognition events occurring after the effective date. Adoption is not expected to have a material impact on our financial condition or results of operations.</div> </div>

1900000

-31000

16000

-499000

165000

512000

498000

1329000

1900000

1800000

1200000

2286000

-400000

1996000

3192000

9909000

545000

994000

1127000

1103000

1070000

5070000

<div> <table border="0" cellspacing="0"> <tr><td width="82%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="82%" align="left">Year Ending December 31, </td> <td width="3%" align="left">  </td> <td width="14%" align="left">  </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2013 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">545 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2014 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">1,070 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2015 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">1,103 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2016 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">1,127 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">2017 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">994 </td></tr> <tr valign="bottom"><td style="text-indent: 9.36pt;" width="82%" align="left">Thereafter </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">5,070 </td></tr> <tr valign="bottom"><td width="82%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">9,909 </td></tr></table> </div>

1000000

1100000

1200000

2891000

52353000

2029

2021

2030

2017

96000

82000

<div> NOTE I – OTHER ASSETS – LONG TERM Other assets – long term consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="27%"> </td> <td width="32%"> </td> <td width="6%"> </td> <td width="15%"> </td> <td width="7%"> </td> <td width="10%"> </td></tr> <tr valign="bottom"><td width="27%" align="left"> </td> <td width="32%" align="left"> </td> <td width="6%" align="center"> </td> <td style="text-indent: 5px;" width="32%" colspan="3" align="center">December 31,</td></tr> <tr valign="bottom"><td width="27%" align="left"> </td> <td width="32%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td></tr> <tr valign="bottom"><td width="27%" align="left">Prepaid carrier fees</td> <td width="32%" align="left"> </td> <td width="6%" align="left">$</td> <td width="15%" align="right">1,880</td> <td width="7%" align="left">$</td> <td width="10%" align="right">2,060</td></tr> <tr valign="bottom"><td width="27%" align="left">Cost-basis investments</td> <td width="32%" align="left"> </td> <td width="6%" align="left"> </td> <td width="15%" align="right">522</td> <td width="7%" align="left"> </td> <td width="10%" align="right">522</td></tr> <tr valign="bottom"><td width="27%" align="left">Debt issuance cost</td> <td width="32%" align="left"> </td> <td width="6%" align="left"> </td> <td width="15%" align="right">101</td> <td width="7%" align="left"> </td> <td width="10%" align="right">103</td></tr> <tr valign="bottom"><td width="27%" align="left">Deposits</td> <td width="32%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">195</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">124</td></tr> <tr valign="bottom"><td width="27%" align="left"> </td> <td width="32%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">2,698</td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">2,809</td></tr></table></div>   During 2011, we purchased and installed telecommunication infrastructure equipment and related equipment to improve the capacity and functionality of our devices operating on one of our carrier networks. To comply with the needs of one of our carriers and in exchange for more favorable carrier fees, we transferred the legal right to the equipment to the vendor. Thus, our existing agreement with this vendor was amended to provide for the new carrier fees and the legal transfer of the equipment. We accounted for this transaction as a non-monetary exchange. The $2.2 million cost of the equipment was determined to be its fair value and we recorded this transaction by transferring the equipment cost to prepaid carrier fees. The prepaid expense is being amortized as a reduction in cost of sales for subscription revenue on a straight-line basis over the term of the agreement, which is ten years. As of December 31, 2012 and 2011, we held investments with a combined value of $0.5 million in two privately-held companies. These investments are accounted for on a cost basis as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. Our investments are in entities that are not publicly traded and, therefore, no established market for the securities exists. Our cost-method investments are carried at historical cost in our consolidated financial statements and measured at fair value on a nonrecurring basis when indicators of impairment exist. If we determine that the carrying value of the cost-method investments are in excess of estimated fair value, we will record an impairment charge in other, non-operating income (expense), net to adjust the carrying value to estimated fair value, when the impairment is deemed other-than-temporary. We regularly evaluate the carrying value of these cost-method investments for impairment. As of December 31, 2012, no events had occurred that would adversely affect the carrying value of these investments, therefore, the fair value of the cost-method investments is not estimated. We have not recorded any impairment charges for these cost-method investments during years ended December 31, 2012, 2011 or 2010. </div>

2809000

2698000

-13000

5000

<div> NOTE O – OTHER EXPENSE (INCOME), NET Other expense (income), net includes $0.5 million during the year ended December 31, 2012 for additional financing costs related to assets previously transferred to a vendor in a nonmonetary exchange. See Note I Other Assets – Long Term. </div>

1392000

866000

<div> NOTE K – OTHER CURRENT LIABILITIES Other current liabilities consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="26%"> </td> <td width="42%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="9%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="26%" align="left"> </td> <td width="42%" align="left"> </td> <td width="7%" align="left"> </td> <td width="25%" colspan="3" align="center">December 31,</td></tr> <tr valign="bottom"><td width="26%" align="left"> </td> <td width="42%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2011</td></tr> <tr valign="bottom"><td width="26%" align="left">Accrued expenses</td> <td width="42%" align="left"> </td> <td width="7%" align="left">$</td> <td style="text-indent: 2px;" width="8%" align="right">333</td> <td width="9%" align="left">$</td> <td width="8%" align="right">809</td></tr> <tr valign="bottom"><td width="26%" align="left">Sales tax payable</td> <td width="42%" align="left"> </td> <td width="7%" align="left"> </td> <td style="text-indent: 2px;" width="8%" align="right">104</td> <td width="9%" align="left"> </td> <td style="text-indent: 2px;" width="8%" align="left">-</td></tr> <tr valign="bottom"><td width="26%" align="left">Payroll liabilities</td> <td width="42%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 2px;" width="8%" align="right">429</td> <td style="border-bottom: #000000 1px solid;" width="9%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">583</td></tr> <tr valign="bottom"><td width="26%" align="left"> </td> <td width="42%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="8%" align="right">866</td> <td style="border-bottom: #000000 3px double;" width="9%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">1,392</td></tr></table></div>   </div>

346000

679000

35000

29000

64000

26000

2898000

1202000

117000

2000000

1889000

2116000

2773000

200000

322000

523000

603000

1679000

3000

957000

1511000

766000

545000

28100000

6000000

3000000

-500000

-300000

-2306000

-265000

44000

221000

189000

1244000

747000

<div> NOTE G – PROPERTY AND EQUIPMENT Property and equipment consisted of the following: <div> <table border="0" cellspacing="0"> <tr><td width="64%"> </td> <td width="4%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="5%"> </td> <td width="11%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td style="text-indent: 35px;" width="64%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Leasehold improvements</td> <td width="4%" align="left">$</td> <td width="11%" align="right">340</td> <td width="2%" align="left"> </td> <td width="5%" align="left">$</td> <td width="11%" align="right">1,443</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Plant and equipment</td> <td width="4%" align="left"> </td> <td width="11%" align="right">2,783</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="11%" align="right">11,703</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Furniture and fixtures</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">511</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">917</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Total property and equipment</td> <td width="4%" align="left"> </td> <td width="11%" align="right">3,634</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="11%" align="right">14,063</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Accumulated depreciation and amortization</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(1,184</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(12,811</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="64%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">2,450</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">1,252</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table></div>   During the year ended December 31, 2012, we wrote off $12.3 million of fully depreciated and amortized property and equipment. Depreciation and amortization of property and equipment for the years ended December 31, 2012, 2011 and 2010 was $0.7 million, $0.7 million, and $0.9 million, respectively. </div>

2200000

14063000

11703000

917000

1443000

3634000

2783000

511000

340000

1252000

2450000

<div> <div> Property and Equipment Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Leased property under capital leases is amortized over the lives of the respective leases or over the service lives of the assets for those leases and leasehold improvements, whichever is shorter. Depreciation for property and equipment is calculated using the straight-line method over the following estimated lives: <div> <table border="0" cellspacing="0"> <tr><td width="5%"> </td> <td width="58%"> </td> <td width="35%"> </td></tr> <tr valign="bottom"><td align="left">· </td> <td align="left">Machinery and equipment </td> <td align="left">4-10 years </td></tr> <tr valign="bottom"><td align="left">· </td> <td align="left">Furniture, fixtures and fittings </td> <td align="left">3-10 years </td></tr> <tr valign="bottom"><td align="left">· </td> <td align="left">Leasehold improvements </td> <td align="left">up to 10 years </td></tr></table></div></div> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="64%"> </td> <td width="4%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="5%"> </td> <td width="11%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td style="text-indent: 35px;" width="64%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Leasehold improvements</td> <td width="4%" align="left">$</td> <td width="11%" align="right">340</td> <td width="2%" align="left"> </td> <td width="5%" align="left">$</td> <td width="11%" align="right">1,443</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Plant and equipment</td> <td width="4%" align="left"> </td> <td width="11%" align="right">2,783</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="11%" align="right">11,703</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Furniture and fixtures</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">511</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">917</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Total property and equipment</td> <td width="4%" align="left"> </td> <td width="11%" align="right">3,634</td> <td width="2%" align="left"> </td> <td width="5%" align="left"> </td> <td width="11%" align="right">14,063</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Accumulated depreciation and amortization</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(1,184</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">(12,811</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="64%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">2,450</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">1,252</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table> </div>

P10Y

P3Y

P10Y

P4Y

211000

370000

255000

<div> <table style="width: 467px; height: 155px;" border="0" cellspacing="0"> <tr><td width="66%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="2%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="66%" align="left"> </td> <td width="34%" colspan="4" align="center">December 31,</td></tr> <tr valign="bottom"><td width="66%" align="center">Identifiable Assets</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2011</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="66%" align="left">M2M Services</td> <td width="2%" align="left">$</td> <td width="15%" align="right">58,460</td> <td width="2%" align="left">$</td> <td width="15%" align="right">47,985</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="66%" align="left">Other Services</td> <td width="2%" align="left"> </td> <td width="15%" align="right">2,120</td> <td width="2%" align="left"> </td> <td width="15%" align="right">1,779</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="66%" align="left">Unallocated Corporate</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">11,567</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">11,664</td></tr> <tr valign="bottom"><td width="66%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">72,147</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">61,428</td></tr></table> </div>

361000

134000

45000

138000

50000

100000

73000

229000

446000

237000

3148000

2726000

3183000

<div> <div> Engineering and Development Engineering and development expenses that are not capitalizable software development costs are charged to operations in the period in which they are incurred. Engineering and development costs consist primarily of salaries, and other personnel-related costs, bonuses, and third-party services. For the years ended December 31, 2012, 2011 and 2010, engineering and development costs recorded in operations amounted to $3.2 million, $2.7 million and $3.1 million, respectively.</div> </div>

221000

-14288000

-7123000

<div> <div class="MetaData"> Revenue Recognition Our revenue is generated from four sources: <div> </div> <ul> <li>the provision of data transportation services, generally under recurring or multi-year contractually based agreements </li> <li>professional services </li> <li>the provision of services </li> <li>the supply of hardware </li></ul> Revenue is recognized when persuasive evidence of an agreement exists, the hardware or service has been delivered, fees and prices are fixed and determinable, and collectability is probable and when all other significant obligations have been fulfilled. Revenue derived from maintenance services is recognized ratably over the contract term. We may, under an appropriate agreement, bill in advance for the service to be provided. In these instances, we record the advance charge as deferred revenue, a liability in the accompanying consolidated balance sheets, and recognize the revenue ratably over future periods in accordance with the contract term as the service is completed, delivered or performed. Our revenue in the consolidated statements of operations and comprehensive income (loss) is net of sales taxes. We recognize revenue from the provision of data transportation services when we perform the services or process transactions in accordance with contractual performance standards. Revenue is earned monthly on the basis of the contracted monthly fee and an excess message fee charge, should it apply, that is volume based. We may, under an appropriate agreement, bill in advance for the data transport service to be provided. In these instances, we recognize the advance charge (even if nonrefundable) as deferred revenue and recognize the revenue over future periods in accordance with the contract term as the data transport service is delivered or performed. Unbilled revenue consists of earned but unbilled revenue that results from non-calendar month billing cycles and the one-month lag time in billing related to certain of our services. Direct and incremental costs associated with deferred revenue are deferred, classified as deferred costs and recognized in the period revenue is recognized. We recognize revenue from hardware sales at the time of shipment and passage of title. Provision for rebates, promotions, product returns and discounts to customers is recorded as a reduction in revenue in the same period that the revenue is recognized. We offer customers the right to return hardware that does not function properly within a limited time after delivery. We continuously monitor and track such hardware returns and record a provision for the estimated amount of such future returns based on historical experience and any notification received of pending returns. While such returns have historically been within expectations and the provisions established, we cannot guarantee that we will continue to experience the same return rates that we have experienced in the past. Any significant increase in hardware failure rates and the resulting credit returns could have a material adverse impact on operating results for the period or periods in which such returns materialize. We recognize revenue from the provision of services at the time of the completion, delivery or performance of the service. For those revenue arrangements that include multiple elements, we first determine whether each service, or element, meets the separation criteria of related accounting guidance. For hardware elements that contain software, we determine whether the hardware and software function together to provide the element's core functionality The accounting guidance provides a hierarchy of evidence to determine the selling price for each element in the order of (1) vendor-specific objective evidence (VSOE), (2) third-party evidence (TPE), and (3) management's best estimate. We currently determine the amount to allocate to each element based on VSOE, when available. When VSOE cannot be established, we attempt to establish the selling price of the elements based on management's best estimate. We may provide multiple services under the terms of an arrangement and it is required to assess whether one or more units of accounting are present. Service fees are typically accounted for as one unit of accounting as fair value evidence for individual tasks or milestones is not available. We follow the guidelines discussed above in determining revenue; however, certain judgments and estimates are made and used to determine revenue recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a given period. Revenue from contracts for our professional services where we design or redesign, build and implement new or enhanced systems applications for clients are recognized on the proportional performance method of accounting. Proportional performance accounting involves calculating the percentage of services provided during the reporting period compared to the total estimated services to be provided over the duration of the contract. Estimated revenues by applying the proportional performance method include estimated incentives for which achievement of defined goals is deemed probable. This method is followed where reasonably dependable estimates of revenues and costs can be made. We measure our progress for completion based on either the hours worked as a percentage of the total number of hours of the project or by delivery and customer acceptance of specific milestones as outlined per the terms of the agreement with the customer. Contract revenue and costs are continuously monitored during the term of the contract, and recorded revenue and costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenue and income and are reflected in the financial statements in the periods in which they are first identified. If estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable.</div> </div>

104000

58243000

56710000

1533000

58360000

57212000

1148000

66740000

65293000

1447000

1533000

1148000

1447000

<div> <table border="0" cellspacing="0"> <tr><td width="26%"> </td> <td width="42%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="9%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="26%" align="left"> </td> <td width="42%" align="left"> </td> <td width="7%" align="left"> </td> <td width="25%" colspan="3" align="center">December 31,</td></tr> <tr valign="bottom"><td width="26%" align="left"> </td> <td width="42%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2011</td></tr> <tr valign="bottom"><td width="26%" align="left">Accrued expenses</td> <td width="42%" align="left"> </td> <td width="7%" align="left">$</td> <td style="text-indent: 2px;" width="8%" align="right">333</td> <td width="9%" align="left">$</td> <td width="8%" align="right">809</td></tr> <tr valign="bottom"><td width="26%" align="left">Sales tax payable</td> <td width="42%" align="left"> </td> <td width="7%" align="left"> </td> <td style="text-indent: 2px;" width="8%" align="right">104</td> <td width="9%" align="left"> </td> <td style="text-indent: 2px;" width="8%" align="left">-</td></tr> <tr valign="bottom"><td width="26%" align="left">Payroll liabilities</td> <td width="42%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 2px;" width="8%" align="right">429</td> <td style="border-bottom: #000000 1px solid;" width="9%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">583</td></tr> <tr valign="bottom"><td width="26%" align="left"> </td> <td width="42%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double; text-indent: 2px;" width="8%" align="right">866</td> <td style="border-bottom: #000000 3px double;" width="9%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">1,392</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="44%"> </td> <td width="6%"> </td> <td width="9%"> </td> <td width="3%"> </td> <td width="7%"> </td> <td width="9%"> </td> <td width="3%"> </td> <td width="6%"> </td> <td width="8%"> </td> <td width="5%"> </td></tr> <tr valign="bottom"><td width="44%" align="left"> </td> <td width="6%" align="left"> </td> <td width="45%" colspan="7" align="center">December 31,</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 16px;" width="44%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="44%" align="left">Current:</td> <td width="6%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Federal</td> <td width="6%" align="left">$</td> <td width="9%" align="right">(16</td> <td width="3%" align="left">)</td> <td width="7%" align="right">$</td> <td width="9%" align="right">41</td> <td width="3%" align="left"> </td> <td width="6%" align="left">$</td> <td width="8%" align="right">52</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">State</td> <td width="6%" align="left"> </td> <td width="9%" align="right">36</td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="right">69</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="right">55</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Foreign</td> <td width="6%" align="left"> </td> <td width="9%" align="right">-</td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="right">-</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="right">(36</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Reserve for Uncertain Tax Positions</td> <td width="6%" align="left"> </td> <td width="9%" align="right">(41</td> <td width="3%" align="left">)</td> <td width="7%" align="left"> </td> <td width="9%" align="right">(166</td> <td width="3%" align="left">)</td> <td width="6%" align="left"> </td> <td width="8%" align="right">(61</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td width="44%" align="left">Deferred:</td> <td width="6%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="7%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">Federal</td> <td width="6%" align="left"> </td> <td width="9%" align="right">(4,424</td> <td width="3%" align="left">)</td> <td width="7%" align="left"> </td> <td width="9%" align="right">-</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="8%" align="right">(145</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 4px;" width="44%" align="left">State</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="right">(364</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(9</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">)</td></tr> <tr valign="bottom"><td width="44%" align="left"> </td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">(4,809</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="7%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">(56</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">(144</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">)</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="58%"> </td> <td width="4%"> </td> <td width="12%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="10%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td style="text-indent: 30px;" width="58%" align="left">(in thousands)</td> <td width="4%" align="left"> </td> <td width="30%" colspan="4" align="center">December 31,</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Current deferred tax asset (liability):</td> <td width="4%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Inventories</td> <td width="4%" align="left">$</td> <td width="12%" align="right">245</td> <td width="3%" align="left"> </td> <td width="5%" align="right">$</td> <td width="10%" align="right">368</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Accrued expenses</td> <td width="4%" align="left"> </td> <td width="12%" align="right">64</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">72</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Net operating loss carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">984</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Other</td> <td width="4%" align="left"> </td> <td width="12%" align="right">205</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">165</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Valuation allowance</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">(451</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">(615</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">1,047</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">(10</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr><td width="95%" colspan="7"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Non-current deferred tax asset (liability):</td> <td width="4%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Intangible assets</td> <td width="4%" align="left"> </td> <td width="12%" align="right">686</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">4,319</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Federal net operating loss carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">12</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">12</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Net operating loss carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">2,365</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">5,818</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Tax credit carry forward</td> <td width="4%" align="left"> </td> <td width="12%" align="right">1,372</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">1,394</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Difference between book and tax</td> <td width="4%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Basis of property</td> <td width="4%" align="left"> </td> <td width="12%" align="right">(53</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">(1,917</td> <td width="3%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Other</td> <td width="4%" align="left"> </td> <td width="12%" align="right">1,021</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">769</td> <td width="3%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">Valuation allowance</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">(1,662</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">(10,385</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">3,741</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">10</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td></tr> <tr valign="bottom"><td width="58%" align="left">Net deferred tax assets</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">4,788</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="54%"> </td> <td width="5%"> </td> <td width="10%"> </td> <td width="4%"> </td> <td width="9%"> </td> <td width="6%"> </td> <td width="6%"> </td> <td width="5%"> </td></tr> <tr valign="bottom"><td width="54%" align="left">(in thousands, except per share data)</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="54%" align="left">Net earnings (loss)</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">7,165</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">1,854</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">(380</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">)</td></tr> <tr valign="bottom"><td width="54%" align="left">Common Shares:</td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="9%" align="left"> </td> <td width="6%" align="left"> </td> <td width="6%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Weighted average common shares outstanding</td> <td width="5%" align="left"> </td> <td width="10%" align="right">15,412</td> <td width="4%" align="left"> </td> <td width="9%" align="right">15,055</td> <td width="6%" align="left"> </td> <td width="6%" align="right">15,084</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Dilutive effect of common stock equivalents</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">602</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="right">655</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">-</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Total</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">16,014</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="9%" align="right">15,710</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">15,084</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left"> </td></tr> <tr><td width="99%" colspan="8"> </td></tr> <tr valign="bottom"><td width="54%" align="left">Net earnings (loss) per common share:</td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="4%" align="left"> </td> <td width="9%" align="left"> </td> <td width="6%" align="left"> </td> <td width="6%" align="left"> </td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Basic</td> <td width="5%" align="left">$</td> <td width="10%" align="right">0.46</td> <td width="4%" align="left">$</td> <td width="9%" align="right">0.12</td> <td width="6%" align="left">$</td> <td width="6%" align="right">(0.03</td> <td width="5%" align="left">)</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="54%" align="left">Diluted</td> <td width="5%" align="left">$</td> <td width="10%" align="right">0.45</td> <td width="4%" align="left">$</td> <td width="9%" align="right">0.12</td> <td width="6%" align="left">$</td> <td width="6%" align="right">(0.03</td> <td width="5%" align="left">)</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="45%"> </td> <td width="5%"> </td> <td width="12%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="10%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="4%"> </td></tr> <tr valign="bottom"><td width="45%" align="center">(in thousands)</td> <td width="5%" align="left"> </td> <td width="43%" colspan="7" align="center">December 31,</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 4px;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Income tax expense (benefit) computed at</td> <td width="5%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="left"> </td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">U.S. corporate tax rate of 34%</td> <td width="5%" align="left">$</td> <td width="12%" align="right">801</td> <td width="3%" align="left"> </td> <td style="text-indent: 4px;" width="5%" align="left">$</td> <td width="10%" align="right">611</td> <td width="3%" align="left"> </td> <td width="5%" align="left">$</td> <td width="5%" align="right">(178</td> <td width="4%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Adjustments attributable to:</td> <td width="5%" align="left"> </td> <td width="12%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="left"> </td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="left"> </td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Deferred balance true-up</td> <td width="5%" align="left"> </td> <td width="12%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">302</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">75</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Valuation allowance</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(5,544</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">(993</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="5%" align="right">631</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Federal alternative minimum tax</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(16</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">41</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">52</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">State income tax</td> <td width="5%" align="left"> </td> <td width="12%" align="right">36</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">69</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">145</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="45%" align="left">Foreign income tax</td> <td width="5%" align="left"> </td> <td width="12%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">(36</td> <td width="4%" align="left">)</td></tr> <tr><td width="97%" colspan="10"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Reserve for uncertain tax positions</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(41</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">(166</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="5%" align="right">(61</td> <td width="4%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Non-deductible expenses</td> <td width="5%" align="left"> </td> <td width="12%" align="right">(55</td> <td width="3%" align="left">)</td> <td width="5%" align="left"> </td> <td width="10%" align="right">80</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">153</td> <td width="4%" align="left"> </td></tr> <tr><td width="97%" colspan="10"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Tax goodwill</td> <td width="5%" align="left"> </td> <td width="12%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">(928</td> <td width="4%" align="left">)</td></tr> <tr valign="bottom"><td width="45%" align="left">Stock option shortfall</td> <td width="5%" align="left"> </td> <td width="12%" align="right">10</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="10%" align="right">-</td> <td width="3%" align="left"> </td> <td width="5%" align="left"> </td> <td width="5%" align="right">1</td> <td width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left">Other</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="right">2</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td></tr> <tr valign="bottom"><td width="45%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">(4,809</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double; text-indent: 3px;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">(56</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">)</td> <td style="border-bottom: #000000 3px double;" width="5%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="5%" align="right">(144</td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">)</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="21%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="40%" colspan="8" align="center">December 31, 2012</td> <td style="border-bottom: #000000 1px solid;" width="32%" colspan="7" align="center">December 31, 2011</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="8%" align="center">Weighted</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Gross</td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Gross</td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="8%" align="center">Average</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Carrying</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Accumulated</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Net Book</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Carrying</td> <td width="2%" align="center"> </td> <td width="8%" align="center">Accumulated</td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="8%" align="center">Net Book</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Useful Lives</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amount</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amortization</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 6.6pt;" width="8%" align="center">Value</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amount</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Amortization</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">Value</td></tr> <tr valign="bottom"><td width="21%" align="left">Purchased and developed software</td> <td width="8%" align="right">2.66</td> <td width="2%" align="left">$</td> <td width="8%" align="right">6,354</td> <td width="2%" align="right">$</td> <td width="8%" align="right">(1,848</td> <td width="2%" align="left">)</td> <td width="2%" align="right">$</td> <td width="8%" align="right">4,506</td> <td width="2%" align="left">$</td> <td width="8%" align="right">11,411</td> <td style="text-indent: 12.6pt;" width="2%" align="left">$</td> <td width="8%" align="right">(8,023</td> <td width="2%" align="left">)</td> <td width="2%" align="left">$</td> <td width="8%" align="right">3,388</td></tr> <tr valign="bottom"><td width="21%" align="left">Patents, trade and service marks</td> <td width="8%" align="right">6.10</td> <td width="2%" align="left"> </td> <td width="8%" align="right">13,490</td> <td width="2%" align="right"> </td> <td width="8%" align="right">(10,870</td> <td width="2%" align="left">)</td> <td width="2%" align="right"> </td> <td width="8%" align="right">2,620</td> <td width="2%" align="left"> </td> <td width="8%" align="right">14,084</td> <td width="2%" align="left"> </td> <td width="8%" align="right">(11,232</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="8%" align="right">2,852</td></tr> <tr valign="bottom"><td width="21%" align="left">Customer relationships</td> <td width="8%" align="right">5.48</td> <td width="2%" align="left"> </td> <td width="8%" align="right">1,966</td> <td width="2%" align="right"> </td> <td width="8%" align="right">(294</td> <td width="2%" align="left">)</td> <td width="2%" align="right"> </td> <td width="8%" align="right">1,672</td> <td width="2%" align="left"> </td> <td width="8%" align="right">914</td> <td width="2%" align="left"> </td> <td width="8%" align="right">(221</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="8%" align="right">693</td></tr> <tr valign="bottom"><td width="21%" align="left">Other intangible assets</td> <td width="8%" align="right">1.88</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">2,387</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="right"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(525</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="right"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">1,862</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">2,285</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(930</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">1,355</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="8%" align="left"> </td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">24,197</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="right">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">(13,537</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="right">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">10,660</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">28,694</td> <td style="border-bottom: #000000 2px solid; text-indent: 12.6pt;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">(20,406</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 2px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 2px solid;" width="8%" align="right">8,288</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="81%"> </td> <td width="3%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="81%" align="left">2013 </td> <td width="3%" align="left">$ </td> <td width="14%" align="right">547 </td></tr> <tr valign="bottom"><td width="81%" align="left">2014 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">553 </td></tr> <tr valign="bottom"><td width="81%" align="left">2015 </td> <td width="3%" align="left">  </td> <td width="14%" align="right">481 </td></tr> <tr valign="bottom"><td width="81%" align="left">2016 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">342 </td></tr> <tr valign="bottom"><td width="81%" align="left">Net lease receivable </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">1,923 </td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="62%"> </td> <td width="2%"> </td> <td width="10%"> </td> <td width="2%"> </td> <td width="11%"> </td> <td width="2%"> </td> <td width="10%"> </td></tr> <tr valign="bottom"><td width="62%" align="left"> </td> <td width="2%" align="left"> </td> <td width="10%" align="center"> </td> <td width="2%" align="center"> </td> <td width="11%" align="center">Other</td> <td width="2%" align="center"> </td> <td width="10%" align="center"> </td></tr> <tr valign="bottom"><td width="62%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">M2M</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Services</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">Total</td></tr> <tr valign="bottom"><td width="62%" align="left">Balance January 1, 2011 and 2012</td> <td width="2%" align="left">$</td> <td width="10%" align="right">22,838</td> <td width="2%" align="left">$</td> <td width="11%" align="right">949</td> <td width="2%" align="left">$</td> <td width="10%" align="right">23,787</td></tr> <tr valign="bottom"><td width="62%" align="left">Acquired goodwill, year ended December 31, 2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">2,580</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">2,580</td></tr> <tr valign="bottom"><td width="62%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">25,418</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">949</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">26,367</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="30%"> </td> <td width="36%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="7%"> </td> <td width="6%"> </td> <td width="2%"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="36%" align="left"> </td> <td width="7%" align="left"> </td> <td width="23%" colspan="4" align="center">December 31,</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="36%" align="center">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Raw materials</td> <td width="36%" align="left"> </td> <td width="7%" align="left">$</td> <td width="8%" align="right">922</td> <td width="2%" align="left"> </td> <td width="7%" align="left">$</td> <td width="6%" align="right">1,290</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Work-in-progress</td> <td width="36%" align="left"> </td> <td width="7%" align="left"> </td> <td width="8%" align="right">6</td> <td width="2%" align="left"> </td> <td width="7%" align="left"> </td> <td width="6%" align="right">14</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Finished goods</td> <td width="36%" align="left"> </td> <td width="7%" align="left"> </td> <td width="8%" align="right">6,937</td> <td width="2%" align="left"> </td> <td width="7%" align="left"> </td> <td width="6%" align="right">6,331</td> <td width="2%" align="left"> </td></tr> <tr valign="bottom"><td width="30%" align="left">Reserve for obsolesence</td> <td width="36%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(362</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="right">(578</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="36%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">7,503</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="6%" align="right">7,057</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="47%"> </td> <td width="7%"> </td> <td width="11%"> </td> <td width="7%"> </td> <td width="10%"> </td> <td width="6%"> </td> <td width="12%"> </td></tr> <tr valign="bottom"><td width="47%" align="left"> </td> <td width="7%" align="left"> </td> <td width="46%" colspan="5" align="center">For the years ended December 31,</td></tr> <tr valign="bottom"><td style="text-indent: 21px;" width="47%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">2010</td></tr> <tr valign="bottom"><td width="47%" align="left">Accrued litigation settlement</td> <td width="7%" align="left">$</td> <td style="text-indent: 1px;" width="11%" align="right">-</td> <td width="7%" align="left">$</td> <td style="text-indent: 10px;" width="10%" align="right">-</td> <td width="6%" align="left">$</td> <td width="12%" align="right">1,730</td></tr> <tr valign="bottom"><td width="47%" align="left">Legal fees associated w/ litigation</td> <td width="7%" align="left"> </td> <td style="text-indent: 1px;" width="11%" align="right">-</td> <td width="7%" align="left"> </td> <td style="text-indent: 9px;" width="10%" align="right">338</td> <td width="6%" align="left"> </td> <td width="12%" align="right">1,000</td></tr> <tr valign="bottom"><td width="47%" align="left">Other (underwriting/accounting)</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 1px;" width="11%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 10px;" width="10%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">295</td></tr> <tr valign="bottom"><td width="47%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double; text-indent: 1px;" width="11%" align="right">-</td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double; text-indent: 9px;" width="10%" align="right">338</td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">3,025</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="51%"> </td> <td width="22%"> </td> <td width="4%"> </td> <td width="4%"> </td> <td width="16%"> </td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center">Weighted</td></tr> <tr valign="bottom"><td align="left"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center"> </td> <td align="center">Average</td></tr> <tr valign="bottom"><td align="left"> </td> <td style="border-bottom: #000000 1px solid;" align="center">Shares</td> <td style="border-bottom: #000000 1px solid;" align="center"> </td> <td style="border-bottom: #000000 1px solid;" align="center"> </td> <td style="border-bottom: #000000 1px solid;" align="center">Exercise Price</td></tr> <tr valign="bottom"><td align="left">Outstanding, January 1, 2012</td> <td align="right">2,224,743</td> <td align="left"> </td> <td align="left">$</td> <td align="right">5.55</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards granted</td> <td align="right">228,000</td> <td align="left"> </td> <td align="left"> </td> <td align="right">9.32</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards exercised</td> <td align="right">(638,011</td> <td align="left">)</td> <td align="left"> </td> <td align="right">4.16</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards forfeited</td> <td align="right">(135,750</td> <td align="left">)</td> <td align="left"> </td> <td align="right">7.31</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" align="left">Awards expired</td> <td style="border-bottom: #000000 1px solid;" align="right">(16,500</td> <td style="border-bottom: #000000 1px solid;" align="left">)</td> <td style="border-bottom: #000000 1px solid;" align="left"> </td> <td style="border-bottom: #000000 1px solid;" align="right">10.00</td></tr> <tr valign="bottom"><td align="left">Outstanding, at December 31, 2012</td> <td style="border-bottom: #000000 1px solid;" align="right">1,662,482</td> <td style="border-bottom: #000000 1px solid;" align="left"> </td> <td style="border-bottom: #000000 1px solid;" align="left">$</td> <td style="border-bottom: #000000 1px solid;" align="right">6.37</td></tr> <tr valign="bottom"><td align="left">Exercisable at December 31, 2012</td> <td style="border-bottom: #000000 3px double;" align="right">958,521</td> <td style="border-bottom: #000000 3px double;" align="left"> </td> <td style="border-bottom: #000000 3px double;" align="left">$</td> <td style="border-bottom: #000000 3px double;" align="right">6.21</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="27%"> </td> <td width="32%"> </td> <td width="6%"> </td> <td width="15%"> </td> <td width="7%"> </td> <td width="10%"> </td></tr> <tr valign="bottom"><td width="27%" align="left"> </td> <td width="32%" align="left"> </td> <td width="6%" align="center"> </td> <td style="text-indent: 5px;" width="32%" colspan="3" align="center">December 31,</td></tr> <tr valign="bottom"><td width="27%" align="left"> </td> <td width="32%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="center">2011</td></tr> <tr valign="bottom"><td width="27%" align="left">Prepaid carrier fees</td> <td width="32%" align="left"> </td> <td width="6%" align="left">$</td> <td width="15%" align="right">1,880</td> <td width="7%" align="left">$</td> <td width="10%" align="right">2,060</td></tr> <tr valign="bottom"><td width="27%" align="left">Cost-basis investments</td> <td width="32%" align="left"> </td> <td width="6%" align="left"> </td> <td width="15%" align="right">522</td> <td width="7%" align="left"> </td> <td width="10%" align="right">522</td></tr> <tr valign="bottom"><td width="27%" align="left">Debt issuance cost</td> <td width="32%" align="left"> </td> <td width="6%" align="left"> </td> <td width="15%" align="right">101</td> <td width="7%" align="left"> </td> <td width="10%" align="right">103</td></tr> <tr valign="bottom"><td width="27%" align="left">Deposits</td> <td width="32%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">195</td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="10%" align="right">124</td></tr> <tr valign="bottom"><td width="27%" align="left"> </td> <td width="32%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">2,698</td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="10%" align="right">2,809</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="30%"> </td> <td width="45%"> </td> <td width="4%"> </td> <td width="7%"> </td> <td width="4%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="45%" align="left"> </td> <td width="4%" align="center"> </td> <td width="19%" colspan="3" align="center">December 31,</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="45%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2011</td></tr> <tr valign="bottom"><td width="30%" align="left">Prepaid expenses</td> <td width="45%" align="left"> </td> <td width="4%" align="left"> </td> <td width="7%" align="right">545</td> <td width="4%" align="left"> </td> <td width="8%" align="right">766</td></tr> <tr valign="bottom"><td width="30%" align="left">Debt issuance costs</td> <td width="45%" align="left"> </td> <td width="4%" align="left"> </td> <td width="7%" align="right">80</td> <td width="4%" align="left"> </td> <td width="8%" align="right">43</td></tr> <tr valign="bottom"><td width="30%" align="left">Deferred costs</td> <td width="45%" align="left"> </td> <td width="4%" align="left"> </td> <td width="7%" align="right">804</td> <td width="4%" align="left"> </td> <td width="8%" align="right">52</td></tr> <tr valign="bottom"><td width="30%" align="left">Other</td> <td width="45%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="right">82</td> <td style="border-bottom: #000000 1px solid;" width="4%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">96</td></tr> <tr valign="bottom"><td width="30%" align="left"> </td> <td width="45%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="4%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="7%" align="right">1,511</td> <td style="border-bottom: #000000 3px double;" width="4%" align="right">$</td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">957</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="55%"> </td> <td width="2%"> </td> <td width="17%"> </td> <td width="2%"> </td> <td width="22%"> </td></tr> <tr valign="bottom"><td width="55%" align="left"> </td> <td width="2%" align="left"> </td> <td width="17%" align="center"> </td> <td width="2%" align="center"> </td> <td width="22%" align="center">Useful</td></tr> <tr valign="bottom"><td style="border-bottom: #000000 1px solid;" width="55%" align="left">Allocation</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="17%" align="center">Fair Value</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="22%" align="center">Lives</td></tr> <tr valign="bottom"><td width="55%" align="left">Inventory</td> <td style="text-indent: 3.239pt;" width="2%" align="left">$</td> <td width="17%" align="right">46</td> <td width="2%" align="left"> </td> <td width="22%" align="center">n/a</td></tr> <tr valign="bottom"><td width="55%" align="left">Customer list</td> <td width="2%" align="left"> </td> <td width="17%" align="right">1,241</td> <td width="2%" align="left"> </td> <td width="22%" align="center">7</td></tr> <tr valign="bottom"><td width="55%" align="left">Patents</td> <td width="2%" align="left"> </td> <td width="17%" align="right">748</td> <td width="2%" align="left"> </td> <td width="22%" align="center">12</td></tr> <tr valign="bottom"><td width="55%" align="left">Software</td> <td width="2%" align="left"> </td> <td width="17%" align="right">215</td> <td width="2%" align="left"> </td> <td width="22%" align="center">3</td></tr> <tr valign="bottom"><td width="55%" align="left">Other intangible assets</td> <td width="2%" align="left"> </td> <td width="17%" align="right">211</td> <td width="2%" align="left"> </td> <td width="22%" align="center">5</td></tr> <tr valign="bottom"><td width="55%" align="left">Goodwill</td> <td width="2%" align="left"> </td> <td width="17%" align="right">2,580</td> <td width="2%" align="left"> </td> <td width="22%" align="center">Indefinite</td></tr> <tr valign="bottom"><td width="55%" align="left">Deferred revenue</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="17%" align="right">(665</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td width="22%" align="center">n/a</td></tr> <tr valign="bottom"><td width="55%" align="left">Net assets acquired</td> <td style="border-bottom: #000000 3px double; text-indent: 3.239pt;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="17%" align="right">4,376</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td width="22%" align="left"> </td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="17%"> </td> <td width="21%"> </td> <td width="5%"> </td> <td width="23%"> </td> <td width="5%"> </td> <td width="20%"> </td> <td width="5%"> </td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td width="79%" colspan="6" align="center">For the yeard ended December 31,</td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="23%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="20%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td></tr> <tr valign="bottom"><td width="17%" align="left">U.S.</td> <td width="21%" align="right">88</td> <td width="5%" align="left">%</td> <td width="23%" align="right">90</td> <td width="5%" align="left">%</td> <td width="20%" align="right">92</td> <td width="5%" align="left">%</td></tr> <tr valign="bottom"><td width="17%" align="left">Canada</td> <td width="21%" align="right">10</td> <td width="5%" align="left"> </td> <td width="23%" align="right">5</td> <td width="5%" align="left"> </td> <td width="20%" align="right">6</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Others</td> <td style="border-bottom: #000000 1px solid;" width="21%" align="right">2</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="23%" align="right">5</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="20%" align="right">2</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="right">100</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">%</td> <td style="border-bottom: #000000 1px solid;" width="23%" align="right">100</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">%</td> <td style="border-bottom: #000000 1px solid;" width="20%" align="right">100</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">%</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="21%"> </td> <td width="31%"> </td> <td width="2%"> </td> <td width="14%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="2%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left"> </td> <td width="50%" colspan="6" align="center">For the years ended December 31,</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="16%" colspan="2" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2010</td></tr> <tr><td width="102%" colspan="8"> </td></tr> <tr valign="bottom"><td width="21%" align="left">Revenues:</td> <td width="31%" align="left"> </td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">M2M Services</td> <td width="31%" align="left"> </td> <td width="2%" align="left">$</td> <td width="14%" align="right">65,293</td> <td width="2%" align="left">$</td> <td width="15%" align="right">57,212</td> <td width="2%" align="left">$</td> <td width="15%" align="right">56,710</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">Other Services</td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">1,447</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">1,148</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">1,533</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">66,740</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">58,360</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">58,243</td></tr> <tr><td width="102%" colspan="8"> </td></tr> <tr valign="bottom"><td width="21%" align="left">Gross profit:</td> <td width="31%" align="left"> </td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">M2M Services</td> <td width="31%" align="left"> </td> <td width="2%" align="left">$</td> <td width="14%" align="right">28,030</td> <td width="2%" align="left">$</td> <td width="15%" align="right">25,789</td> <td width="2%" align="left">$</td> <td width="15%" align="right">24,873</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">Other Services</td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">772</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">413</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">784</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 3px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px solid;" width="14%" align="right">28,802</td> <td style="border-bottom: #000000 3px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px solid;" width="15%" align="right">26,202</td> <td style="border-bottom: #000000 3px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px solid;" width="15%" align="right">25,657</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="57%"> </td> <td width="15%"> </td> <td width="3%"> </td> <td width="6%"> </td> <td width="17%"> </td></tr> <tr valign="bottom"><td width="57%" align="left">Outstanding, as of January 1, 2012</td> <td width="15%" align="right">50,711</td> <td width="3%" align="left"> </td> <td width="6%" align="left">$</td> <td width="17%" align="right">9.40</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="57%" align="left">Granted</td> <td width="15%" align="right">54,000</td> <td width="3%" align="left"> </td> <td width="6%" align="left"> </td> <td width="17%" align="right">8.92</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="57%" align="left">Vested</td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">(50,711</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="17%" align="right">9.40</td></tr> <tr valign="bottom"><td width="57%" align="left">Outstanding, as of December 31, 2012</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">54,000</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="6%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="17%" align="right">8.92</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="36%"> </td> <td width="20%"> </td> <td width="21%"> </td> <td width="21%"> </td></tr> <tr valign="bottom"><td width="36%" align="left"> </td> <td width="20%" align="center">December 31,</td> <td width="21%" align="center">December 31,</td> <td width="21%" align="center">December 31,</td></tr> <tr valign="bottom"><td width="36%" align="left">Assumptions:</td> <td style="border-bottom: #000000 1px solid;" width="20%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">2010</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Expected volatility</td> <td width="20%" align="right">69.8% - 72.4%</td> <td width="21%" align="right">66.6% - 77.1%</td> <td width="21%" align="right">72.5% - 80.3%</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Weighted-average volatility</td> <td width="20%" align="right">71.82%</td> <td width="21%" align="right">72.51%</td> <td width="21%" align="right">77.59%</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Expected dividends</td> <td width="20%" align="right">0%</td> <td width="21%" align="right">0%</td> <td width="21%" align="right">0%</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Expected term (in years)</td> <td width="20%" align="right">6.2– 6.3</td> <td width="21%" align="right">3.5 – 10.0</td> <td width="21%" align="right">4.0– 7.0</td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="36%" align="left">Risk-free rate</td> <td width="20%" align="right">1.03%</td> <td width="21%" align="right">1.91%</td> <td width="21%" align="right">0.98%</td></tr></table> </div>

<div> <table border="0" cellspacing="0"> <tr><td width="63%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="8%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td style="text-indent: 27px;" width="63%" align="left">(in thousands) </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center">  </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="left">2011 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Balance at January 1 </td> <td style="text-indent: 1px;" width="7%" align="left">$ </td> <td width="8%" align="right">189 </td> <td width="3%" align="left">  </td> <td width="3%" align="left">$ </td> <td width="8%" align="right">283 </td> <td width="3%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Decreases as a result of positions taken during prior periods </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(30 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(94 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Balance at December 31 </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">159 </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">189 </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">  </td></tr></table> </div>

<div> SCHEDULE II NUMEREX CORP. VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2012, 2011, 2010 (in thousands) <div> <table border="0" cellspacing="0"> <tr><td width="46%"> </td> <td width="3%"> </td> <td width="9%"> </td> <td width="3%"> </td> <td width="8%"> </td> <td width="2%"> </td> <td width="3%"> </td> <td width="9%"> </td> <td width="2%"> </td> <td width="2%"> </td> <td width="4%"> </td> <td width="8%"> </td></tr> <tr valign="bottom"><td width="46%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="center">Balance at</td> <td width="3%" align="center"> </td> <td width="8%" align="center">Additions</td> <td width="2%" align="center"> </td> <td width="3%" align="center"> </td> <td width="9%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="4%" align="center"> </td> <td width="8%" align="center"> </td></tr> <tr valign="bottom"><td width="46%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="center">beginning of</td> <td width="3%" align="center"> </td> <td width="8%" align="center">charged to</td> <td width="2%" align="center"> </td> <td width="3%" align="center"> </td> <td width="9%" align="center"> </td> <td width="2%" align="center"> </td> <td width="2%" align="center"> </td> <td width="4%" align="center"> </td> <td width="8%" align="center">Balance at</td></tr> <tr valign="bottom"><td style="border-bottom: #000000 1px solid; text-indent: 29px;" width="46%" align="left">Description</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">Period</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">expense</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="9%" align="center">Deductions</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="4%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">end of Period</td></tr> <tr valign="bottom"><td width="46%" align="left">Year ended December 31, 2012:</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Accounts and financing receivables</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Allowance for uncollectible accounts</td> <td width="3%" align="left">$</td> <td width="9%" align="right">236</td> <td width="3%" align="left">$</td> <td width="8%" align="right">255</td> <td width="2%" align="left"> </td> <td width="3%" align="left">$</td> <td width="9%" align="right">(108</td> <td width="2%" align="left">)</td> <td width="2%" align="left">a</td> <td width="4%" align="left">$</td> <td width="8%" align="right">383</td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Inventory</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Reserve for obsolescence</td> <td width="3%" align="left"> </td> <td width="9%" align="right">578</td> <td width="3%" align="left"> </td> <td width="8%" align="right">(167</td> <td width="2%" align="left">)</td> <td width="3%" align="left"> </td> <td width="9%" align="right">(49</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="right">362</td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Deferred tax assets</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Valuation allowance</td> <td width="3%" align="left"> </td> <td width="9%" align="right">11,000</td> <td width="3%" align="left"> </td> <td width="8%" align="right">-</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">(8,890</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="right">2,110</td></tr> <tr><td width="99%" colspan="12"> </td></tr> <tr valign="bottom"><td width="46%" align="left">Year ended December 31, 2011:</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Accounts receivable</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Allowance for uncollectible accounts</td> <td width="3%" align="left"> </td> <td width="9%" align="right">356</td> <td width="3%" align="left"> </td> <td width="8%" align="right">370</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">(490</td> <td width="2%" align="left">)</td> <td width="2%" align="left">a</td> <td width="4%" align="left"> </td> <td width="8%" align="right">236</td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Inventory</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Reserve for obsolescense</td> <td width="3%" align="left"> </td> <td width="9%" align="right">624</td> <td width="3%" align="left"> </td> <td width="8%" align="right">83</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">(129</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="right">578</td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Deferred tax assets</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Valuation allowance</td> <td width="3%" align="left"> </td> <td width="9%" align="right">11,970</td> <td width="3%" align="left"> </td> <td width="8%" align="right">-</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">(970</td> <td width="2%" align="left">)</td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="right">11,000</td></tr> <tr><td width="99%" colspan="12"> </td></tr> <tr valign="bottom"><td width="46%" align="left">Year ended December 31, 2010:</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Accounts receivable</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Allowance for uncollectible accounts</td> <td width="3%" align="left"> </td> <td width="9%" align="right">548</td> <td width="3%" align="left"> </td> <td width="8%" align="right">211</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">(403</td> <td width="2%" align="left">)</td> <td width="2%" align="left">a</td> <td width="4%" align="left"> </td> <td width="8%" align="right">356</td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Inventory</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Reserve for obsolescense</td> <td width="3%" align="left"> </td> <td width="9%" align="right">439</td> <td width="3%" align="left"> </td> <td width="8%" align="right">185</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">-</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="right">624</td></tr> <tr valign="bottom"><td style="text-indent: 1px;" width="46%" align="left">Deferred tax assets</td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="3%" align="left"> </td> <td width="8%" align="left"> </td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="left"> </td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="46%" align="left">Valuation allowance</td> <td width="3%" align="left"> </td> <td width="9%" align="right">11,339</td> <td width="3%" align="left"> </td> <td width="8%" align="right">-</td> <td width="2%" align="left"> </td> <td width="3%" align="left"> </td> <td width="9%" align="right">631</td> <td width="2%" align="left"> </td> <td width="2%" align="left"> </td> <td width="4%" align="left"> </td> <td width="8%" align="right">11,970</td></tr></table></div>   (a) Amounts written off as uncollectible, net of recoveries <div> </div> </div>

<div> <div> NOTE U – SEGMENT INFORMATION We have two reportable operating segments. These segments are M2M and Other Services. The M2M segment is made up of all our cellular and satellite machine-to-machine communications hardware and services. The Other Services segment includes our video conferencing hardware and installation of telecommunications equipment. Our chief operating decision maker is the Chief Executive Officer (CEO). While the CEO is apprised of a variety of financial metrics and information, the business is principally managed on a segment basis, with the CEO evaluating performance based upon segment gross profit. The CEO does not view segment results below gross profit, and therefore unallocated operating expenses, interest and other, net, and the (benefit) provision for income taxes are not broken out by segment. Items below are reviewed on a consolidated basis. Our revenues and gross profit by reportable segment are summarized below. <div> <table border="0" cellspacing="0"> <tr><td width="21%"> </td> <td width="31%"> </td> <td width="2%"> </td> <td width="14%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="2%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left"> </td> <td width="50%" colspan="6" align="center">For the years ended December 31,</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left">(in thousands)</td> <td style="border-bottom: #000000 1px solid;" width="16%" colspan="2" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2010</td></tr> <tr><td width="102%" colspan="8"> </td></tr> <tr valign="bottom"><td width="21%" align="left">Revenues:</td> <td width="31%" align="left"> </td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">M2M Services</td> <td width="31%" align="left"> </td> <td width="2%" align="left">$</td> <td width="14%" align="right">65,293</td> <td width="2%" align="left">$</td> <td width="15%" align="right">57,212</td> <td width="2%" align="left">$</td> <td width="15%" align="right">56,710</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">Other Services</td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">1,447</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">1,148</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">1,533</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">66,740</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">58,360</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">58,243</td></tr> <tr><td width="102%" colspan="8"> </td></tr> <tr valign="bottom"><td width="21%" align="left">Gross profit:</td> <td width="31%" align="left"> </td> <td width="2%" align="left"> </td> <td width="14%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td> <td width="2%" align="left"> </td> <td width="15%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">M2M Services</td> <td width="31%" align="left"> </td> <td width="2%" align="left">$</td> <td width="14%" align="right">28,030</td> <td width="2%" align="left">$</td> <td width="15%" align="right">25,789</td> <td width="2%" align="left">$</td> <td width="15%" align="right">24,873</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="21%" align="left">Other Services</td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">772</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">413</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">784</td></tr> <tr valign="bottom"><td width="21%" align="left"> </td> <td width="31%" align="left"> </td> <td style="border-bottom: #000000 3px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px solid;" width="14%" align="right">28,802</td> <td style="border-bottom: #000000 3px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px solid;" width="15%" align="right">26,202</td> <td style="border-bottom: #000000 3px solid;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px solid;" width="15%" align="right">25,657</td></tr></table></div>   <div> <table style="width: 467px; height: 155px;" border="0" cellspacing="0"> <tr><td width="66%"> </td> <td width="2%"> </td> <td width="15%"> </td> <td width="2%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td width="66%" align="left"> </td> <td width="34%" colspan="4" align="center">December 31,</td></tr> <tr valign="bottom"><td width="66%" align="center">Identifiable Assets</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="17%" colspan="2" align="center">2011</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="66%" align="left">M2M Services</td> <td width="2%" align="left">$</td> <td width="15%" align="right">58,460</td> <td width="2%" align="left">$</td> <td width="15%" align="right">47,985</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="66%" align="left">Other Services</td> <td width="2%" align="left"> </td> <td width="15%" align="right">2,120</td> <td width="2%" align="left"> </td> <td width="15%" align="right">1,779</td></tr> <tr valign="bottom"><td style="text-indent: 9.479pt;" width="66%" align="left">Unallocated Corporate</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">11,567</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="right">11,664</td></tr> <tr valign="bottom"><td width="66%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">72,147</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="15%" align="right">61,428</td></tr></table></div>   Revenue generated from customers based outside of the U.S. is summarized as follows: <div> <table border="0" cellspacing="0"> <tr><td width="17%"> </td> <td width="21%"> </td> <td width="5%"> </td> <td width="23%"> </td> <td width="5%"> </td> <td width="20%"> </td> <td width="5%"> </td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td width="79%" colspan="6" align="center">For the yeard ended December 31,</td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="23%" align="center">2011</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="20%" align="center">2010</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td></tr> <tr valign="bottom"><td width="17%" align="left">U.S.</td> <td width="21%" align="right">88</td> <td width="5%" align="left">%</td> <td width="23%" align="right">90</td> <td width="5%" align="left">%</td> <td width="20%" align="right">92</td> <td width="5%" align="left">%</td></tr> <tr valign="bottom"><td width="17%" align="left">Canada</td> <td width="21%" align="right">10</td> <td width="5%" align="left"> </td> <td width="23%" align="right">5</td> <td width="5%" align="left"> </td> <td width="20%" align="right">6</td> <td width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left">Others</td> <td style="border-bottom: #000000 1px solid;" width="21%" align="right">2</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="23%" align="right">5</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="20%" align="right">2</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td></tr> <tr valign="bottom"><td width="17%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="21%" align="right">100</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">%</td> <td style="border-bottom: #000000 1px solid;" width="23%" align="right">100</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">%</td> <td style="border-bottom: #000000 1px solid;" width="20%" align="right">100</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left">%</td></tr></table></div>   Substantially all revenue generated from outside the U.S. and Canada is invoiced and collected in U.S. dollars. As of December 31, 2012 and 2011, long-lived assets located outside of the U.S. were less than 1% of total assets.</div> </div>

7030000

9169000

8662000

938000

1231000

1388000

P4Y

54000

50000

8.92

50711

54000

9.40

8.92

50711

9.40

7.38

7.40

4.17

0.00

P7Y

P4Y

P10Y

P3Y6M

P6Y3M18D

P6Y2M12D

0.803

0.771

0.724

0.725

0.666

0.698

0.0098

0.0191

0.0103

0.7759

0.7251

0.7182

1500000

958521

136250

6.21

200000

400000

4000000

16500

135750

228000

2.92

4.47

5.99

2224743

1662482

352000

5.55

6.37

7252000

958521

P4Y4M24D

11251000

<div> <table border="0" cellspacing="0"> <tr><td width="58%"> </td> <td width="5%"> </td> <td width="15%"> </td> <td width="5%"> </td> <td width="14%"> </td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td width="5%" align="left"> </td> <td width="15%" align="center"> </td> <td width="5%" align="center"> </td> <td width="14%" align="center">Fully Vested</td></tr> <tr valign="bottom"><td width="58%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="5%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">Outstanding</td> <td style="border-bottom: #000000 1px solid;" width="5%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">and Exercisable</td></tr> <tr valign="bottom"><td width="58%" align="left">Total shares</td> <td width="5%" align="left"> </td> <td width="15%" align="right">1,662,482</td> <td width="5%" align="left"> </td> <td width="14%" align="right">958,521</td></tr> <tr valign="bottom"><td width="58%" align="left">Aggregate intrinsic value (in thousands)</td> <td width="5%" align="left">$</td> <td width="15%" align="right">11,251</td> <td width="5%" align="left">$</td> <td width="14%" align="right">7,252</td></tr> <tr valign="bottom"><td width="58%" align="left">Weighted-average remaining</td> <td width="5%" align="left"> </td> <td width="15%" align="left"> </td> <td width="5%" align="left"> </td> <td width="14%" align="left"> </td></tr> <tr valign="bottom"><td style="text-indent: 2px;" width="58%" align="left">contractual term (years)</td> <td width="5%" align="left"> </td> <td width="15%" align="right">5.7</td> <td width="5%" align="left"> </td> <td width="14%" align="right">4.4</td></tr></table> </div>

1662482

P5Y8M12D

3000

2000

278000

25000

6000

608000

4.16

10.00

7.31

9.32

<div> <div> Share-Based Compensation Share-based compensation is estimated using the Black-Scholes option pricing model. For grants that require achievement of market conditions, a lattice model is used to estimate fair value. Use of a valuation model requires us to make certain assumptions with respect to selected model inputs. We estimate expected volatility based on the historical volatility of our stock. Historical data on exercise patterns is the basis for determining the expected life of an option. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant. Changes in these input variables would affect the amount of expense associated with stock-based compensation. The compensation expense recognized for all stock-based awards is net of estimated forfeitures. We estimate forfeiture rates based on historical analysis of option forfeitures. If actual forfeitures should vary from estimated forfeitures, adjustments to compensation expense may be required. See Note N for additional information.</div> </div>

8.83

9.74

10.21

16308000

16363000

16691000

17171000

<div> NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Numerex Corp. (NASDAQ: NMRX) is a leading provider of interactive and on-demand machine-to-machine, referred to as M2M, technology and service, offered on a subscription basis, used in the development and support of M2M solutions for the enterprise and government markets worldwide. The Company offers Numerex DNA® that may include hardware and smart Devices, cellular and satellite Network services, and software Applications that are delivered through Numerex FAST® (Foundation Application Software Technology). In addition, business services are offered to enable the development of efficient, reliable, and secure solutions while accelerating deployment. Numerex is ISO 27001 information security-certified, highlighting the Company's focus on M2M data security, service reliability, and round-the-clock support of its customers' M2M solutions. <div> Basis of Presentation The consolidated financial statements include the results of operations and financial position of Numerex and its wholly owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Intercompany accounts and transactions have been eliminated in consolidation.</div> <div> Use of Estimates In preparing our financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, doubtful accounts, inventory reserves, goodwill and intangible assets and income taxes. Actual results could differ from those estimates.</div> <div> Concentration of Credit Risk Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments and accounts receivable. We maintain our cash and overnight investment balances in financial institutions, which at times exceed federally insured limits. We had cash balances in excess of these limits of $4.1 million and $9.5 million at December 31, 2012 and 2011, respectively. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on cash and cash equivalents. Concentration of credit risk with respect to accounts receivable from customers is limited. We perform credit evaluations of prospective customers and we evaluate our trade receivables periodically. Our accounts receivable is at risk to the extent that we may not be able to collect from some of our customers. See Note P for more information.</div> <div class="MetaData"> Revenue Recognition Our revenue is generated from four sources: <div> </div> <ul> <li>the provision of data transportation services, generally under recurring or multi-year contractually based agreements </li> <li>professional services </li> <li>the provision of services </li> <li>the supply of hardware </li></ul> Revenue is recognized when persuasive evidence of an agreement exists, the hardware or service has been delivered, fees and prices are fixed and determinable, and collectability is probable and when all other significant obligations have been fulfilled. Revenue derived from maintenance services is recognized ratably over the contract term. We may, under an appropriate agreement, bill in advance for the service to be provided. In these instances, we record the advance charge as deferred revenue, a liability in the accompanying consolidated balance sheets, and recognize the revenue ratably over future periods in accordance with the contract term as the service is completed, delivered or performed. Our revenue in the consolidated statements of operations and comprehensive income (loss) is net of sales taxes. We recognize revenue from the provision of data transportation services when we perform the services or process transactions in accordance with contractual performance standards. Revenue is earned monthly on the basis of the contracted monthly fee and an excess message fee charge, should it apply, that is volume based. We may, under an appropriate agreement, bill in advance for the data transport service to be provided. In these instances, we recognize the advance charge (even if nonrefundable) as deferred revenue and recognize the revenue over future periods in accordance with the contract term as the data transport service is delivered or performed. Unbilled revenue consists of earned but unbilled revenue that results from non-calendar month billing cycles and the one-month lag time in billing related to certain of our services. Direct and incremental costs associated with deferred revenue are deferred, classified as deferred costs and recognized in the period revenue is recognized. We recognize revenue from hardware sales at the time of shipment and passage of title. Provision for rebates, promotions, product returns and discounts to customers is recorded as a reduction in revenue in the same period that the revenue is recognized. We offer customers the right to return hardware that does not function properly within a limited time after delivery. We continuously monitor and track such hardware returns and record a provision for the estimated amount of such future returns based on historical experience and any notification received of pending returns. While such returns have historically been within expectations and the provisions established, we cannot guarantee that we will continue to experience the same return rates that we have experienced in the past. Any significant increase in hardware failure rates and the resulting credit returns could have a material adverse impact on operating results for the period or periods in which such returns materialize. We recognize revenue from the provision of services at the time of the completion, delivery or performance of the service. For those revenue arrangements that include multiple elements, we first determine whether each service, or element, meets the separation criteria of related accounting guidance. For hardware elements that contain software, we determine whether the hardware and software function together to provide the element's core functionality The accounting guidance provides a hierarchy of evidence to determine the selling price for each element in the order of (1) vendor-specific objective evidence (VSOE), (2) third-party evidence (TPE), and (3) management's best estimate. We currently determine the amount to allocate to each element based on VSOE, when available. When VSOE cannot be established, we attempt to establish the selling price of the elements based on management's best estimate. We may provide multiple services under the terms of an arrangement and it is required to assess whether one or more units of accounting are present. Service fees are typically accounted for as one unit of accounting as fair value evidence for individual tasks or milestones is not available. We follow the guidelines discussed above in determining revenue; however, certain judgments and estimates are made and used to determine revenue recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a given period. Revenue from contracts for our professional services where we design or redesign, build and implement new or enhanced systems applications for clients are recognized on the proportional performance method of accounting. Proportional performance accounting involves calculating the percentage of services provided during the reporting period compared to the total estimated services to be provided over the duration of the contract. Estimated revenues by applying the proportional performance method include estimated incentives for which achievement of defined goals is deemed probable. This method is followed where reasonably dependable estimates of revenues and costs can be made. We measure our progress for completion based on either the hours worked as a percentage of the total number of hours of the project or by delivery and customer acceptance of specific milestones as outlined per the terms of the agreement with the customer. Contract revenue and costs are continuously monitored during the term of the contract, and recorded revenue and costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenue and income and are reflected in the financial statements in the periods in which they are first identified. If estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable.</div> <div> Cash and Cash Equivalents We consider all investments with an original maturity of three months or less at date of purchase to be cash equivalents. Cash equivalents consist of overnight repurchase agreements and amounts on deposit in foreign banks. Cash of $0.4 million and $0.3 million at December 31, 2012 and 2011, respectively was held in foreign bank accounts.</div> <div> Restricted Cash Cash of $0.2 million at December 31, 2011, was held in escrow related to a capital lease obligation. There was no restricted cash at December 31, 2012.</div> <div> Accounts Receivable and Allowance for Doubtful Accounts Trade receivables are stated at gross invoiced amount less discounts, other allowances and provision for uncollectible accounts. Trade receivables include unbilled revenue which consists of earned but unbilled revenue that results from non-calendar month billing cycles and lag time in billing related to certain of our services. Credit is extended to customers based on an evaluation of a customer's financial condition and, generally, collateral is not required. Accounts receivable are generally due within 30-90 days and are stated at amounts due from customers net of an allowance for doubtful accounts. We maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based principally upon specifically identified amounts where collection is deemed doubtful. Additional non-specific allowances are recorded based on historical experience and our assessment of a variety of factors related to the general financial condition and business prospects of our customer base. We review the collectability of individual accounts and assess the adequacy of the allowance for doubtful accounts quarterly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.</div> <div> Financing Receivables Financing receivables are due in installments. We evaluate the credit quality of our financing receivables on an ongoing basis utilizing an aging of receivables and write-offs, customer collection experience, the customer's financial condition and known risk characteristics impacting the respective customer base, as well as existing economic conditions, to determine if an allowance is necessary. All amounts due at December 31, 2012 were deemed fully collectible and an allowance was not necessary.</div> <div> Inventories and Reserves for Excess, Slow-Moving and Obsolete Inventory Inventories, valued at the lower of cost or market, consist of: i) Cellular M2M Modems & Modules, ii) Security devices and iii) Satellite M2M Modems. Cost is generally determined on the first-in, first-out (FIFO) basis. We include raw material freight costs to manufacturers in inventory and these costs are recognized in cost of sales when the product is sold. Lower of cost or market value of inventory is determined at the operating unit level and evaluated periodically. Estimates for obsolescence or slow moving inventory are maintained based on current economic conditions, historical sales quantities and patterns and, in some cases, the specific risk of loss on specifically identified inventories. Such inventories are recorded at estimated realizable value net of the costs of disposal.</div> <div> Property and Equipment Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Leased property under capital leases is amortized over the lives of the respective leases or over the service lives of the assets for those leases and leasehold improvements, whichever is shorter. Depreciation for property and equipment is calculated using the straight-line method over the following estimated lives: <div> <table border="0" cellspacing="0"> <tr><td width="5%"> </td> <td width="58%"> </td> <td width="35%"> </td></tr> <tr valign="bottom"><td align="left">· </td> <td align="left">Machinery and equipment </td> <td align="left">4-10 years </td></tr> <tr valign="bottom"><td align="left">· </td> <td align="left">Furniture, fixtures and fittings </td> <td align="left">3-10 years </td></tr> <tr valign="bottom"><td align="left">· </td> <td align="left">Leasehold improvements </td> <td align="left">up to 10 years </td></tr></table></div></div>   <div> Capitalized Software We capitalize software both for internal use and for inclusion in our products. For internal use software, costs incurred in the preliminary project stage of developing or acquiring internal use software are expensed as incurred. After the preliminary project stage is completed, management has approved the project and it is probable that the project will be completed and the software will be used for its intended purpose, we capitalize certain internal and external costs incurred to acquire or create internal use software, principally related to software coding, designing system interfaces and installation and testing of the software. We amortize capitalized internal use software costs using the straight-line method over the estimated useful life of the software, generally from three to seven years. For software embedded in our products we capitalize software development costs when project technological feasibility is established and conclude capitalization when the hardware is ready for release. We amortize capitalized costs for software to be sold using the straight-line method over the estimated useful life of the software, generally from three to seven years. Software development costs incurred prior to the establishment of technological feasibility are expensed as incurred as engineering and development.</div> <div> Goodwill and Intangible Assets Intangible assets consist of patents and acquired intellectual property, customer relationships and goodwill. These assets, except for goodwill, are amortized over their expected useful lives. Patents and acquired intellectual property are amortized using the straight-line method over 7 to 20 years, representing the shorter of their estimated useful lives or the period until the patent renews. Costs to maintain patents are expensed as incurred while costs to renew patents are capitalized and amortized over the remaining estimated useful lives. Customer relationships are amortized using the straight-line method over four to seven years. Goodwill and intangible assets with indefinite lives are not amortized but are subject to an annual impairment test, and more frequently if events or circumstances occur that would indicate a potential decline in their fair value. An impairment charge will be recognized only when the implied fair value of a reporting unit's goodwill is less than its carrying amount. The annual assessment of goodwill for impairment includes comparing the fair value of each reporting unit to the carrying value, referred to as step one. If the fair value of a reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is necessary. If the carrying value of a reporting unit exceeds its fair value, a second test is performed, referred to as step two, to measure the amount of impairment to goodwill, if any. To measure the amount of any impairment, we determine the implied fair value of goodwill in the same manner as if it were acquiring the affected reporting unit in a business combination. Specifically, we allocate the fair value of the affected reporting unit to all of the assets and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the implied fair value of goodwill. If the implied fair value of goodwill is less than the goodwill recorded on the consolidated balance sheet, an impairment charge for the difference is recorded. We base the impairment analysis of goodwill on estimated fair values. The assumptions, inputs and judgments used in performing the valuation analysis are inherently subjective and reflect estimates based on known facts and circumstances at the time the valuation is performed. These estimates and assumptions primarily include, but are not limited to, discount rates; terminal growth rates; projected revenues and costs; projected earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, for expected cash flows; and capital expenditure forecasts. We perform our annual goodwill impairment test as of December 31 absent any impairment indicators or other changes that may cause more frequent analysis. We did not identify an impairment as a result of our annual impairment test and none of the reporting units were at risk of failing step one. In addition, we assess on a quarterly basis whether any events have occurred or circumstances have changed that would indicate an impairment could exist.</div> <div> Impairment of Long-lived Assets Long-lived assets, such as property and equipment, and intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount which the carrying amount of the asset exceeds the fair value of the asset.</div> <div> Income Taxes We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applied to taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets when it is more likely than not that the asset will not be realized. We evaluate liabilities for uncertain tax positions and, as of December 31, 2012, we recorded a net decrease to the liability for unrecognized tax benefits of less than $0.1 million recorded in general and administrative expense. This amount is made up of an accrual of interest and penalties related to state tax exposure in prior years and tax benefit recognized on the settlement of certain state tax exposure. Our total unrecognized tax benefits as of December 31, 2012 were approximately $0.2 million inclusive of interest and penalties of less than $0.1 million. We anticipate a decrease to the balance of total unrecognized tax benefits within the next twelve months of approximately $0.1 million. If we were to recognize these tax benefits, all of the benefit would favorably impact the effective tax rate. The following table summarizes the activity related to our unrecognized tax benefits, net of federal benefit, and excludes interest and penalties: <div> <table border="0" cellspacing="0"> <tr><td width="63%"> </td> <td width="7%"> </td> <td width="8%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="8%"> </td> <td width="3%"> </td></tr> <tr valign="bottom"><td style="text-indent: 27px;" width="63%" align="left">(in thousands) </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="center">2012 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center">  </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="left">2011 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Balance at January 1 </td> <td style="text-indent: 1px;" width="7%" align="left">$ </td> <td width="8%" align="right">189 </td> <td width="3%" align="left">  </td> <td width="3%" align="left">$ </td> <td width="8%" align="right">283 </td> <td width="3%" align="left">  </td></tr> <tr valign="bottom"><td width="63%" align="left">Decreases as a result of positions taken during prior periods </td> <td style="border-bottom: #000000 1px solid;" width="7%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(30 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">) </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">  </td> <td style="border-bottom: #000000 1px solid;" width="8%" align="right">(94 </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left">) </td></tr> <tr valign="bottom"><td width="63%" align="left">Balance at December 31 </td> <td style="border-bottom: #000000 3px double;" width="7%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">159 </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">  </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$ </td> <td style="border-bottom: #000000 3px double;" width="8%" align="right">189 </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">  </td></tr></table></div> We conduct business globally and, as a result, file income tax returns in the United States and in many state and foreign jurisdictions. We are subject to state and local income tax examinations for years after and including 1998. These tax years remain open due to the net operating losses generated in these years that have not been utilized as of the year ended December 31, 2012. Likewise, the existence of net operating losses from earlier periods could subject us to United States federal income tax examination for years including and after 2001, since such net operating losses have not been utilized as of the year ended December 31, 2012. Our 2007 U.S. federal return was audited by the Internal Revenue Service and the examination was concluded in March 2010 with a minor increase to the federal alternative minimum tax liability.</div> <div> Treasury Stock We account for treasury stock under the cost method. When treasury stock is re-issued at a higher price than its cost, the difference is recorded as a component of additional paid-in capital to the extent that there are gains to offset the losses. If there are no treasury stock gains in additional paid-in capital, the losses are recorded as a component of accumulated deficit.</div> <div> Foreign Currency Translation The assets and liabilities of our foreign operations are translated into U.S. dollars at the period end spot exchange rates, and revenues and expenses are translated at estimated average exchange rates for each period. Resulting translation adjustments are reflected as other comprehensive 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. Foreign operations are not significant to us for the years ended December 31, 2012, 2011 or 2010.</div> <div> Engineering and Development Engineering and development expenses that are not capitalizable software development costs are charged to operations in the period in which they are incurred. Engineering and development costs consist primarily of salaries, and other personnel-related costs, bonuses, and third-party services. For the years ended December 31, 2012, 2011 and 2010, engineering and development costs recorded in operations amounted to $3.2 million, $2.7 million and $3.1 million, respectively.</div> <div> Advertising Expenses Advertising expenses are charged to operations in the period in which they are incurred. For the years ended December 31, 2012, 2011 and 2010, advertising costs were approximately $0.8 million, $0.7 million and $0.9 million, respectively.</div> <div> Share-Based Compensation Share-based compensation is estimated using the Black-Scholes option pricing model. For grants that require achievement of market conditions, a lattice model is used to estimate fair value. Use of a valuation model requires us to make certain assumptions with respect to selected model inputs. We estimate expected volatility based on the historical volatility of our stock. Historical data on exercise patterns is the basis for determining the expected life of an option. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant. Changes in these input variables would affect the amount of expense associated with stock-based compensation. The compensation expense recognized for all stock-based awards is net of estimated forfeitures. We estimate forfeiture rates based on historical analysis of option forfeitures. If actual forfeitures should vary from estimated forfeitures, adjustments to compensation expense may be required. See Note N for additional information.</div> <div> Earnings (Loss) Per Share Basic earnings (loss) per common share available to common shareholders is based on the weighted-average number of common shares outstanding excluding the dilutive impact of common stock equivalents. For periods in which we have net income, we base diluted net earnings per share on the weighted-average number of common shares outstanding and dilutive potential common shares, such as dilutive employee stock options and stock appreciation rights. See Note S for additional information.</div> <div> Fair Value of Financial Instruments The hierarchy below lists three levels of fair value, which prioritizes the inputs used in the valuation methodologies, as follows: Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2—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. Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The fair value of financial instruments classified as current assets or liabilities, including cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate carrying value, principally because of the short-term, maturity of those items. The fair value of our capitalized lease obligation approximates carrying value based on the short-term maturity of the obligation. The fair value of our long-term notes receivable and payable approximates carrying value based on their effective interest rates compared to current market rates and similar type borrowing arrangements.</div> <div> Recent Accounting Pronouncements In May 2011, the Financial Accounting Standards Board ("FASB") issued new accounting guidance related to convergence between U.S. GAAP and International Financial Reporting Standards ("IFRS"). The new guidance changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. The new guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact on our fair value measurements, financial condition, results of operations or cash flows. In June 2011, the FASB issued new accounting guidance related to the presentation of comprehensive income. The new guidance will require the presentation of components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. There is no change to the items that we must report in other comprehensive income or when we must reclassify an item of other comprehensive income to net income. In December 2011, FASB issued guidance which indefinitely defers the guidance related to the presentation of reclassification adjustments. The guidance is effective for interim and annual periods beginning after December 15, 2011. We adopted this new accounting guidance during the first quarter of 2012 and because the guidance impacts presentation only, it had no effect on our financial condition, results of operations or cash flows. In September 2011, the FASB issued new accounting guidance which allows an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment. An entity will be required to perform the two-step impairment test only if it concludes, based on a qualitative assessment, the fair value of a reporting unit is more likely than not to be less than its carrying value. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption had no impact on our financial condition or results of operations. In July 2012, the FASB issued new accounting guidance that allows an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived asset is impaired for determining whether it is necessary to perform the quantitative impairment test. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. Adoption is not expected to have an impact on our financial condition or results of operations. In February 2013, the FASB issued an update to the accounting standards to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This update is effective prospectively for reporting periods beginning after December 15, 2012. Adoption is not expected to have an impact on our financial condition or results of operations. In March 2013, the FASB issued an update to the accounting standards to clarify the applicable guidance for a parent company's accounting for the release of the cumulative translation adjustment into net income upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. This guidance is effective for fiscal periods beginning after December 15, 2013, and is to be applied prospectively to derecognition events occurring after the effective date. Adoption is not expected to have a material impact on our financial condition or results of operations.</div> </div>

42037000

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-8136000

<div> NOTE M – WARRANTS We have outstanding warrants purchased by accredited investors as defined by securities regulations. The holders of the warrants have the right to purchase shares of our common stock at exercise prices ranging from $7.73 - $10.13 at December 31, 2012. At the dates of issuance, the fair values of the warrants were determined utilizing the Black-Scholes valuation model. The assumptions used in calculating the values per the Black-Scholes model included risk-free rates, volatility and dividend yield. The warrants were fully exercisable as of the date of issue and there were no new warrants issued during the years ended December 31, 2012 or 2011. The following table represents the activity related to common stock warrants for the years ended December 31, 2012 and 2011: <div> <table border="0" cellspacing="0"> <tr><td width="37%"> </td> <td width="16%"> </td> <td width="2%"> </td> <td width="3%"> </td> <td width="12%"> </td> <td width="14%"> </td> <td width="3%"> </td> <td width="2%"> </td> <td width="11%"> </td></tr> <tr valign="bottom"><td width="37%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="63%" colspan="8" align="center">December 31,</td></tr> <tr valign="bottom"><td width="37%" align="left"> </td> <td style="border-bottom: #000000 1px solid; text-indent: 13px;" width="33%" colspan="4" align="center">2012</td> <td style="border-bottom: #000000 1px solid;" width="30%" colspan="4" align="center">2011</td></tr> <tr valign="bottom"><td width="37%" align="left"> </td> <td width="16%" align="center"> </td> <td width="2%" align="center"> </td> <td width="3%" align="center"> </td> <td width="12%" align="center">Weighted</td> <td width="14%" align="center"> </td> <td width="3%" align="center"> </td> <td width="2%" align="center"> </td> <td width="11%" align="center">Weighted</td></tr> <tr valign="bottom"><td width="37%" align="left"> </td> <td width="16%" align="center">Number of</td> <td width="2%" align="center"> </td> <td width="3%" align="center"> </td> <td width="12%" align="center">Average</td> <td width="14%" align="center">Number of</td> <td width="3%" align="center"> </td> <td width="2%" align="center"> </td> <td width="11%" align="center">Average</td></tr> <tr valign="bottom"><td width="37%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="16%" align="center">Warrants</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="center">Exercise Price</td> <td style="border-bottom: #000000 1px solid;" width="14%" align="center">Warrants</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="center"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="center">Exercise Price</td></tr> <tr valign="bottom"><td width="37%" align="left">Outstanding warrants at January 1</td> <td width="16%" align="right">338,166</td> <td width="2%" align="left"> </td> <td width="3%" align="left">$</td> <td width="12%" align="right">8.03</td> <td width="14%" align="right">582,166</td> <td width="3%" align="left"> </td> <td width="2%" align="left">$</td> <td width="11%" align="right">6.87</td></tr> <tr valign="bottom"><td width="37%" align="left">Exercised</td> <td width="16%" align="right">(66,665</td> <td width="2%" align="left">)</td> <td width="3%" align="left"> </td> <td width="12%" align="right">5.62</td> <td width="14%" align="right">(244,000</td> <td width="3%" align="left">)</td> <td width="2%" align="left"> </td> <td width="11%" align="right">5.26</td></tr> <tr valign="bottom"><td width="37%" align="left">Expired</td> <td style="border-bottom: #000000 1px solid;" width="16%" align="right">(4,874</td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left">)</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="12%" align="right">5.51</td> <td style="border-bottom: #000000 1px solid;" width="14%" align="right">-</td> <td style="border-bottom: #000000 1px solid;" width="3%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="2%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="11%" align="right">-</td></tr> <tr valign="bottom"><td width="37%" align="left">Outstanding warrants at December 31</td> <td style="border-bottom: #000000 3px double;" width="16%" align="right">266,627</td> <td style="border-bottom: #000000 3px double;" width="2%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="3%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="12%" align="right">8.68</td> <td style="border-bottom: #000000 3px double;" width="14%" align="right">338,166</td> <td style="border-bottom: #000000 3px double;" width="3%" align="left"> </td> <td style="border-bottom: #000000 3px double;" width="2%" align="left">$</td> <td style="border-bottom: #000000 3px double;" width="11%" align="right">8.03</td></tr></table></div>   All of the remaining warrants expire during the year ended December 31, 2013. </div>

<div> <div> Treasury Stock We account for treasury stock under the cost method. When treasury stock is re-issued at a higher price than its cost, the difference is recorded as a component of additional paid-in capital to the extent that there are gains to offset the losses. If there are no treasury stock gains in additional paid-in capital, the losses are recorded as a component of accumulated deficit.</div> </div>

476000

39000

71000

336000

16000

7000

3000

50000

54000

638011

42000

189000

365000

560000

77000

59000

29000

281000

242000

33425000

38649000

43271000

<div> NOTE V – SUBSEQUENT EVENTS On April 25, 2011, we filed a universal shelf registration statement on Form S-3 with the SEC. Subject to market conditions, the registration statement allows us, from time to time, to offer and sell up to $30.0 million of equity securities as described in the registration statement. The registration statement was declared effective on May 2, 2011. <div>On January 23, 2013, we filed a prospectus supplement with the SEC in connection with an offering to sell up to 2.3 million shares of our common stock, in addition to 0.3 million shares which were available for purchase by the underwriters, in an underwritten public offering. The prospectus supplement was declared effective on January 24, 2013. In January and February 2013, we received net proceeds of $28.1 million after underwriting fees and discounts in exchange for 2.7 million shares as a result of an underwritten public offering. A portion of these proceeds were used to repay all outstanding amounts of principal and accrued interest on both the Term Loan and the Acquisition Line owed to Silicon Valley Bank in January 2013 (See Note L).</div> On February 21, 2013, we purchased substantially all of the assets and business of AVIDwireless, including intellectual property and know-how, product lines, certain prior art and several customer contracts. The total purchase price consisted of approximately $0.9 million payable in Numerex common shares and $0.2 million in cash. </div>

<div> <table border="0" cellspacing="0"> <tr><td width="64%"> </td> <td width="6%"> </td> <td width="13%"> </td> <td width="15%"> </td></tr> <tr valign="bottom"><td style="text-indent: 30px;" width="64%" align="left">(in thousands)</td> <td width="6%" align="left"> </td> <td width="13%" align="center"> </td> <td width="15%" align="center">Year of</td></tr> <tr valign="bottom"><td width="64%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="6%" align="left"> </td> <td style="border-bottom: #000000 1px solid;" width="13%" align="center">Amount</td> <td style="border-bottom: #000000 1px solid;" width="15%" align="center">Expiration</td></tr> <tr><td width="98%" colspan="4"> </td></tr> <tr valign="bottom"><td width="64%" align="left">Federal net operating losses</td> <td style="text-indent: 1px;" width="6%" align="left">$</td> <td width="13%" align="right">2,891</td> <td width="15%" align="center">2021-2029</td></tr> <tr valign="bottom"><td width="64%" align="left">State net operating losses</td> <td width="6%" align="left"> </td> <td width="13%" align="right">52,353</td> <td width="15%" align="center">2017-2030</td></tr> <tr valign="bottom"><td width="64%" align="left">Minimum tax credit carry forward</td> <td width="6%" align="left"> </td> <td width="13%" align="right">814</td> <td width="15%" align="center">n/a</td></tr> <tr valign="bottom"><td width="64%" align="left">General business credit carry forward</td> <td width="6%" align="left"> </td> <td width="13%" align="right">559</td> <td width="15%" align="center">2012-2023</td></tr></table> </div>

814000

559000

<div> <div> Accounts Receivable and Allowance for Doubtful Accounts Trade receivables are stated at gross invoiced amount less discounts, other allowances and provision for uncollectible accounts. Trade receivables include unbilled revenue which consists of earned but unbilled revenue that results from non-calendar month billing cycles and lag time in billing related to certain of our services. Credit is extended to customers based on an evaluation of a customer's financial condition and, generally, collateral is not required. Accounts receivable are generally due within 30-90 days and are stated at amounts due from customers net of an allowance for doubtful accounts. We maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based principally upon specifically identified amounts where collection is deemed doubtful. Additional non-specific allowances are recorded based on historical experience and our assessment of a variety of factors related to the general financial condition and business prospects of our customer base. We review the collectability of individual accounts and assess the adequacy of the allowance for doubtful accounts quarterly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.</div> </div>

25000

1562

8136000

2898000

618000

668000

283000

189000

159000

94000

30000

100000

61000

166000

41000

-100000

<div> <div> Use of Estimates In preparing our financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, doubtful accounts, inventory reserves, goodwill and intangible assets and income taxes. Actual results could differ from those estimates.</div> </div>

548000

439000

11339000

356000

624000

11970000

236000

578000

11000000

383000

362000

2110000

211000

185000

370000

83000

255000

-167000

403000

-631000

490000

129000

970000

108000

49000

8890000

655000

602000

15084000

15710000

16014000

15084000

15055000

15412000

15084000

15055000

15412000

Amounts written off as uncollectible, net of recoveries