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GOODWILL AND INTANGIBLE ASSETS AND IMPAIRMENT | 12 Months Ended
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Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets Disclosure [Text Block] |
5. | GOODWILL AND INTANGIBLE ASSETS AND IMPAIRMENT
Goodwill The carrying value of goodwill was $12,308,661 for both the years ended December 31, 2012 and 2011. Identifiable intangible assets The changes in the carrying amount of intangible assets for the year ended December 31, 2012 and 2011 were as follows:
|  | 2012 |  |  | 2011 |
Balance at beginning of year |  | $ | 5,551,149 |  |  | $ | 6,494,134 |
Amortization expense |  |  | (919,572 | ) |  |  | (942,985 | )
Balance at end of year |  | $ | 4,631,577 |  |  | $ | 5,551,149 |
The Company has recorded the fair value of the acquired identifiable intangible assets, which are subject to amortization, using the income approach. The following table sets forth the components of these intangible assets as of December 31, 2012 and 2011:
|  |  |  |  | As of December 31, 2012 |
|  | Estimated |  |  | Adjusted |  |  |  |  |  | Net |
|  | Useful |  |  | Carrying |  |  | Accumulated |  |  | as of |
|  | Life |  |  | Amount |  |  | Amortization |  |  | 12/31/2012 |
Trade name |  |  | 20 years |  |  | $ | 704,458 |  |  | $ | (229,975 | ) |  | $ | 474,483 |
Patents and copyrights |  |  | 17 years |  |  |  | 1,117,842 |  |  |  | (396,575 | ) |  |  | 721,267 |
Non-compete agreements |  |  | 5 years |  |  |  | 310,000 |  |  |  | (206,667 | ) |  |  | 103,333 |
Developed technology |  |  | 7 years |  |  |  | 3,941,310 |  |  |  | (2,760,370 | ) |  |  | 1,180,940 |
Backlog |  |  | 3 years |  |  |  | 303,400 |  |  |  | (303,400 | ) |  |  | - |
Non-contractual customer relationships |  |  | 15 years |  |  |  | 3,268,568 |  |  |  | (1,117,014 | ) |  |  | 2,151,554 |
|  |  |  |  |  | $ | 9,645,578 |  |  | $ | (5,014,001 | ) |  | $ | 4,631,577 |
|  | As of December 31, 2011 |
|  | Adjusted |  |  |  |  |  | Net |
|  | Carrying |  |  | Accumulated |  |  | as of |
|  | Amount |  |  | Amortization |  |  | 12/31/2011 |
Trade name |  | $ | 704,458 |  |  | $ | (186,390 | ) |  | $ | 518,068 |
Patents and copyrights |  |  | 1,117,842 |  |  |  | (339,298 | ) |  |  | 778,544 |
Non-compete agreements |  |  | 310,000 |  |  |  | (144,667 | ) |  |  | 165,333 |
Developed technology |  |  | 3,941,310 |  |  |  | (2,225,605 | ) |  |  | 1,715,705 |
Backlog |  |  | 303,400 |  |  |  | (303,400 | ) |  |  | - |
Non-contractual customer relationships |  |  | 3,268,568 |  |  |  | (895,069 | ) |  |  | 2,373,499 |
|  | $ | 9,645,578 |  |  | $ | (4,094,429 | ) |  | $ | 5,551,149 |
The following summarizes amortization of acquisition related intangible assets included in the statement of operations:
|  | Years Ended December 31, |
|  | 2012 |  |  | 2011 |
Cost of sales |  | $ | 771,416 |  |  | $ | 784,749 |
General and administrative |  |  | 148,156 |  |  |  | 158,236 |
|  | $ | 919,572 |  |  | $ | 942,985 |
The Company expects that amortization expense for the next five succeeding years will be as follows:
2013 |  | $ | 907,223 |
2014 |  | $ | 416,656 |
2015 |  | $ | 310,458 |
2016 |  | $ | 310,458 |
2017 |  | $ | 310,458 |
These amounts are subject to change based upon the review of recoverability and useful lives that are performed at least annually. Goodwill and Intangible Asset Impairment The excess of the purchase consideration over the fair value of the assets of acquired businesses is considered goodwill. Under authoritative guidance, purchased goodwill is not amortized, but rather it is periodically reviewed for impairment. The Company had goodwill of $12,308,661 at December 31, 2012 and December 31, 2011. This goodwill resulted from the acquisitions of Mobilisa, Inc. and Positive Access Corporation. For the years ended December 31, 2012 and 2011, the Company performed its annual impairment test of goodwill and concluded that no impairment charge was required for either year. Under authoritative guidance, the Company can use industry and Company specific qualitative factors to determine whether it is more likely than not that impairment exists, before using a two-step quantitative analysis. For the year ended December 31, 2011, the Company determined that no impairment was necessary based on the below qualitative factors:
| · | Macroeconomic conditions
| · | Industry and market considerations
| · | Cost factors
| · | Overall financial performance
| · | Other entity-specific events
| · | Sustained decrease in share price
For the year ended December 31, 2012, after a review of these qualitative factors, the Company determined that it was prudent to perform a two-step quantitative analysis. The first step is to compare the fair value of the Company’s reporting unit, as calculated by its market capitalization, to its carrying value. If the fair value is lower, the second step is to calculate the fair value of the Company’s reporting unit based on a combined income approach using the discounted cash flow methodology, and the market approach based upon the market capitalization of the Company. In the first step, the Company determined that the fair value of its reporting unit was higher than its carrying value, at 102%. Furthermore, the Company believes that the stock price at December 31, 2012, was artificially deflated because of certain factors. Because of this analysis, no second step was deemed necessary. Management’s evaluation of the first step determined that no goodwill impairment charge was required as of December 31, 2012. Market capitalization is a relevant and objective, but not conclusive, indicator of the Company’s fair value considered in our evaluation of goodwill impairment. During the two-month period around December 31, 2012, the Company’s closing stock prices fluctuated from a low of $.57 to a high of $.94. As directed by authoritative guidance, we evaluated the trading activity in the Company’s common stock, including the trading volume. The Company’s stock is thinly traded with relatively small float. As a result, small trading volumes can have a significant effect on the price of our common stock. Based on this evaluation, the results of this approach indicated a fair value in excess of carrying value. The Company also considered whether long-lived assets including intangibles were also impaired. These assets are stated at cost, less accumulated amortization, which is provided for by charges to income on a basis consistent with the utilization of the assets over their useful lives. The carrying value of intangible and long-lived assets is reviewed periodically by the Company for the existence of facts or circumstances that may suggest impairment. If such circumstances exist, the Company would estimate the future, undiscounted cash flows associated with the asset, and compare that to the carrying value. If the carrying value exceeds the estimated cash flows, the asset would be written down to its estimated fair value. As of December 31, 2012 and 2011, the Company determined that there was no impairment of intangible assets.

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7658586&loc=d3e16373-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7658586&loc=d3e16265-109275 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7658586&loc=d3e16323-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 142 -Paragraph 42, 43, 44, 45, 46, 47 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13854-109267 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13816-109267 + Details
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