10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended   June 30, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-07336

RELM WIRELESS CORPORATION

(Exact Name of Registrant as specified in its charter)

Nevada	59-3486297
(State or other jurisdiction	(IRS Employer File Number)
of incorporation)

7100 Technology Drive
West Melbourne, Florida	32904
(Address of principal executive offices)	(zip code)

(321) 984-1414

(Registrant's telephone number, including area code)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes þ  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files. Yes þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer      o                                                                                                            Accelerated filer                   o

Non-accelerated filer        þ (Do not check if a smaller reporting company)                           Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes o   No þ

There were 13,545,482 shares of common stock, $0.60 par value, of the registrant outstanding at July 27, 2012.

Explanatory Note

The purpose of this Amendment No. 1 to Relm Wireless Corporation's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, filed with the Securities and Exchange Commission on August 8, 2012  (the “Form 10-Q”), is solely to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

Under Rule 405(a)(2)(ii) of Regulation S-T, this Exhibit 101 is permitted to be furnished by amendment within 30 days of the original filing date of the Form 10-Q.

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Item 6.	Exhibits
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.INS	XBRL Instance Document*
101SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*

_________

*           Furnished herewith (not filed).

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RELM WIRELESS CORPORATION
	(The “Registrant”)
Date: August 14, 2012	By:	/s/David P. Storey
		David P. Storey President and Chief Executive Officer (Principal executive officer and duly authorized officer)
Date: August 14, 2012	By:	/s/William P. Kelly
		William P. Kelly Executive Vice President and Chief Financial Officer (Principal financial and accounting officer and duly authorized officer)

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Debt (Details Narrative) (USD $)	Jun. 30, 2012
Credit Facility Revolving credit facility	$ 3,284
SiliconValleyBankMember
Credit facility with maximum borrowing	$ 5,000
Maturity date	2012-12-31

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Income Taxes (Details Narrative) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Income Taxes Details Narrative
Income tax expense	$ 765	$ 488
net deferred tax assets	7,679	7,679	7,679
Net Operating loss for federal tax	10,727	10,727
Net operating for state tax			18,829
Valuation allowance		$ 250

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Inventories, net

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 4 - Inventories, net

The components of inventory, net of reserves for slow-moving, excess or obsolete inventory, consist of the following:

	June 30, 2012		December 31, 2011
Finished goods	$	3,326	$	3,981
Work in process		4,638		4,671
Raw materials		3,291		3,496
	$	11,255	$	12,148

Reserves for slow-moving, excess, or obsolete inventory were approximately $2,750 at June 30, 2012, compared with approximately $2,765 at December 31, 2011. The reserve for slow-moving, excess, or obsolete inventory is used to state the Company’s inventories at the lower of cost or market.

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(Loss) Income per Share (Details Narrative)	6 Months Ended
	Jun. 30, 2011
Loss Income Per Share Details Narrative
Antidilutive Securities Excluded from Earning Per Share	1,030,224

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(Loss) Income per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Numerator:
Net income (loss) (numerator for basis and diluted earnings per share)	$ 1,246	$ (855)	$ 845	$ (1,543)
Denominator:
Denominator for basic earnings per share weighted average shares	13,544,273	13,508,815	13,539,111	13,508,815
Effect of dilutive securities:
Options	868		1,740
Denominator
Denominator for diluted earnings per share weighted average shares	13,545,141	13,508,815	13,540,851	13,508,815
Basic income (loss) per share	$ 0.09	$ (0.06)	$ 0.06	$ (0.11)
Diluted income (loss) per share	$ 0.09	$ (0.06)	$ 0.06	$ (0.11)

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Non-Cash Share-Based Employee Compensation (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Non-Cash Share-Based Employee Compensation Details Narrative
Non-cash share-based employee compensation expense	$ 15	$ 41	$ 3	$ 91
Non-cash share-based employee compensation expenses as a component of cost of products	0	4	0	8
Selling, general and administrative expenses	$ 15	$ 37	$ 3	$ 83

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Non-Cash Share-Based Employee Compensation (Details) (USD $)	3 Months Ended
	Jun. 30, 2012
Notes to Financial Statements
Outstanding	503,444
Vested	473,444
Nonvested	30,000
Issued	25,000
Exercised	2,500
Forfeited
Expired	60,000
Outstanding	495,944
Vested	470,944
Nonvested	25,000
Outstanding	$ 3.53
Vested	$ 3.63
Nonvested	$ 2
Issued	$ 2.03
Exercised	$ 0.88
Forfeited
Expired	$ 5.52
Outstanding	$ 3.43
Vested	$ 3.51
Nonvested	$ 2.03
Outstanding	4 years 7 months 6 days
Vested	4 years 6 months 29 days
Nonvested	4 years 10 months 24 days
Outstanding	$ 2.30
Vested	$ 2.40
Nonvested	$ 0.61
Issued	$ 0.68
Exercised	$ 0.62
Forfeited
Expired	$ 2.28
Outstanding	$ 2.24
Vested	$ 2.33
Nonvested	$ 0.68
Outstanding
Vested
Nonvested
Issued
Exercised
Forfeited
Expired
Outstanding	3,500
Vested	$ 3,500
Nonvested

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Allowance for Doubtful Accounts

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 3 - Allowance for Doubtful Accounts

The allowance for doubtful accounts on trade receivables was approximately $39 on gross trade receivables of $5,590 at June 30, 2012 and $44 on gross receivables of $4,199 at December 31, 2011.  This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross receivables.

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Commitments and Contingencies (Details Narrative) (USD $)	Jun. 30, 2012	Jun. 30, 2011
purchase orders to suppliers	$ 2,568
UnitedStatesGovernmentAgenciesMember
Sales Value	3,781	1,805
Sales Contribution %	0.4050	0.3860
Accounts receivable	$ 2,757	$ 765

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 4,402	$ 2,693
Trade accounts receivable (net of allowance for doubtful accounts of $39 and $44 at June 30, 2012 and December 31, 2011, respectively)	5,551	4,155
Inventories, net	11,255	12,148
Deferred tax assets	2,966	3,458
Prepaid expenses and other current assets	982	526
Total current assets	25,156	22,980
Property, plant and equipment, net	1,096	1,158
Deferred tax assets, net	4,712	4,712
Capitalized software, net	2,337	2,778
Other assets	201	219
Total assets	33,502	31,847
Current liabilities:
Accounts payable	2,162	1,756
Accrued compensation and related taxes	1,204	807
Accrued warranty expense	243	247
Accrued other expenses and other current liabilities	195	318
Note payable	53
Deferred revenue	558	385
Total current liabilities	4,415	3,513
Deferred revenue	133	265
Long-term debt
Total liabilities	4,548	3,778
Commitments and contingencies
Stockholders' equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares none issued or outstanding.	0	0
Common stock; $.60 par value; 20,000,000 authorized shares: 13,545,482 and 13,519,323 issued and outstanding shares at June 30, 2012 and December 31, 2011, respectively	8,127	8,111
Additional paid-in capital	24,594	24,570
Accumulated deficit	(3,767)	(4,612)
Total stockholders' equity	28,954	28,069
Total liabilities and stockholders' equity	$ 33,502	$ 31,847

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Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 1 - Condensed Consolidated Financial Statements

The condensed consolidated balance sheets as of June 30, 2012 and December 31, 2011, the condensed consolidated statements of operations for the three and six months ended June 30, 2012 and 2011 and the condensed consolidated statements of cash flows for the six months ended June 30, 2012 and 2011 have been prepared by RELM Wireless Corporation (the Company), and are unaudited.  In the opinion of management, all adjustments, which include normal recurring adjustments, necessary for a fair presentation have been made.  The condensed consolidated balance sheet at December 31, 2011 has been derived from the Company’s audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed with the Securities and Exchange Commission.  The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the operating results for a full year.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the quarterly or six month periods ended June 30, 2012 and 2011, or which are expected to impact future periods, which were not previously disclosed in prior periods.

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Allowance for Doubtful Accounts (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Allowance For Doubtful Accounts Details
Allowance for doubtful accounts on trade receivables	$ 39	$ 44
Gross trade receivables	$ 5,590	$ 4,199

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Inventories, net (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Inventories Net Details
Finished goods	$ 3,326	$ 3,981
Work in process	4,638	4,671
Raw materials	3,291	3,496
Total Inventory	$ 11,255	$ 12,148

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Significant Events and Transactions

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 2 - Significant Events and Transactions

In June 2012 the Company received a blanket purchase agreement (BPA) from the U.S. Bureau of Land Management (BLM) for its new KNG-Series and legacy D-Series digital P25 portable radios, mobile radios and related accessories, operating in the VHF frequency band.  The BPA has a maximum total value of $2.1 million, with a one-year base period and four one-year option periods.  The value for the base period totals approximately $390.  The values for each of the option periods are $448, $371, $422 and $515, respectively.  An order for the entire base period was received and fulfilled in June 2012.

In June 2012 the Company received orders totaling approximately $2.0 million from the U.S. Department of Agriculture Forest Service (USFS) and the National Interagency Fire Center (NIFC).  The orders were for RELM’s D-Series digital P-25 portable and mobile radios with accessories.  The orders were fulfilled during the second quarter 2012.

In May 2012 the Company received an international order totaling approximately US$1.0 million for P25 KNG UHF portable radios and related products from the Company’s Australian dealer.  The radios will be fielded in military bases by Australian Defence Industries.  The order was fulfilled during the second quarter of 2012.  This was the Company’s second order for applications within Australian Defence Industries, following an initial order received in 2011.

In May 2012 the Company received an order from Harris County, Texas (Houston) totaling approximately $2.0 million for P25 digital 800MHz portable trunked radios (KNG P800) with related accessories and features.  The radios are being deployed for use by county law enforcement professionals.  Approximately $1.6 million of the order was fulfilled during the second quarter of 2012.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Allowance for doubtful accounts, net	$ 39	$ 44
Stockholders equity:
Preferred stock, par value	$ 1.00	$ 1.00
Preferred stock, authorized shares	1,000,000	1,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value	$ 0.60	$ 0.60
Common stock, authorized shares	20,000,000	20,000,000
Common stock, issued shares	13,545,482	13,519,323

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Significant Events and Transactions (Policies)

6 Months Ended

Jun. 30, 2012

Significant Events And Transactions Policies

Income Taxes

In June 2012 the Company received a blanket purchase agreement (BPA) from the U.S. Bureau of Land Management (BLM) for its new KNG-Series and legacy D-Series digital P25 portable radios, mobile radios and related accessories, operating in the VHF frequency band.  The BPA has a maximum total value of $2.1 million, with a one-year base period and four one-year option periods.  The value for the base period totals approximately $390.  The values for each of the option periods are $448, $371, $422 and $515, respectively.  An order for the entire base period was received and fulfilled in June 2012.

In June 2012 the Company received orders totaling approximately $2.0 million from the U.S. Department of Agriculture Forest Service (USFS) and the National Interagency Fire Center (NIFC).  The orders were for RELM’s D-Series digital P-25 portable and mobile radios with accessories.  The orders were fulfilled during the second quarter 2012.

In May 2012 the Company received an international order totaling approximately US$1.0 million for P25 KNG UHF portable radios and related products from the Company’s Australian dealer.  The radios will be fielded in military bases by Australian Defence Industries.  The order was fulfilled during the second quarter of 2012.  This was the Company’s second order for applications within Australian Defence Industries, following an initial order received in 2011.

In May 2012 the Company received an order from Harris County, Texas (Houston) totaling approximately $2.0 million for P25 digital 800MHz portable trunked radios (KNG P800) with related accessories and features.  The radios are being deployed for use by county law enforcement professionals.  Approximately $1.6 million of the order was fulfilled during the second quarter of 2012.

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Document and Entity Information (USD $)	6 Months Ended
	Jun. 30, 2012	Jul. 27, 2012
Document And Entity Information
Entity Registrant Name	RELM WIRELESS CORP
Entity Central Index Key	0000002186
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Public Float		$ 8,127,289
Entity Common Stock, Shares Outstanding		13,545,482
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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Inventories, net (Tables)

6 Months Ended

Jun. 30, 2012

Inventories Net Tables

Components of inventory

The components of inventory, net of reserves for slow-moving, excess or obsolete inventory, consist of the following:

	June 30, 2012		December 31, 2011
Finished goods	$	3,326	$	3,981
Work in process		4,638		4,671
Raw materials		3,291		3,496
	$	11,255	$	12,148

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Statement [Abstract]
Sales, net	$ 9,327	$ 4,671	$ 13,696	$ 11,385
Expenses
Cost of products	4,687	3,015	7,389	7,128
Selling, general and administrative	2,624	2,484	4,964	5,732
Total expenses	7,311	5,499	12,353	12,860
Operating income (loss)	2,016	(828)	1,343	(1,475)
Other expense:
Net interest expense	(3)	(27)	(3)	(62)
Other expense	(2)		(7)	(6)
Total other expense	(5)	(27)	(10)	(68)
Income (loss) before income taxes	2,011	(855)	1,333	(1,543)
Income tax benefit	(765)		(488)
Net income (loss)	$ 1,246	$ (855)	$ 845	$ (1,543)
Net earnings (loss) per share-basic:	$ 0.09	$ (0.06)	$ 0.06	$ (0.11)
Net earnings (loss) per share-diluted:	$ 0.09	$ (0.06)	$ 0.06	$ (0.11)
Weighted average shares outstanding-basic	13,544,273	13,508,815	13,539,111	13,508,815
Weighted average shares outstanding-diluted	13,545,141	13,508,815	13,540,851	13,508,815

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 7 - Stockholders' Equity

The changes in consolidated stockholders’ equity for the three months ended June 30, 2012 are as follows:

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit			Total
Balance at December 31, 2011		13,519,323	$	8,111	$	24,570	$	(4,612	)	$	28,069
Common stock option exercise and issued		26,159		16		6					22
Share-based compensation expense		−		−		18		−			18
Net income		−		−		−		845			845
Balance at June 30, 2012		13,545,482	$	8,127	$	24,594	$	(3,767	)	$	28,954

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Capitalized Software

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 6 - Capitalized Software

The Company accounts for the costs of software within its products in accordance with ASC Topic 985-20 “Costs of Software to be Sold, Leased or Marketed”, under which certain software costs incurred subsequent to the establishment of technological feasibility are capitalized and amortized over the estimated lives of the related products. The Company determines technological feasibility to be established upon the internal release of a detailed program design as specified by Topic 985-20. Upon the general release of the product to customers, development costs for that product are amortized over periods not exceeding five years, based on current and future revenue of the product. For the three and six months ended June 30, 2012, the Company’s amortization cost was approximately $220 and $440, respectively, compared with $250 and $500 for the same periods last year.  Net capitalized software costs totaled $2,337 and $2,778 as of June 30, 2012 and December 31, 2011, respectively.

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Inventories, net (Details Narrative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Inventories Net Details Narrative
Reserves for slow-moving, excess, or obsolete inventory	$ 2,750	$ 2,765

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Stockholders’ Equity (Tables)

6 Months Ended

Jun. 30, 2012

Stockholders Equity Tables

Changes in consolidated stockholders’ equity

The changes in consolidated stockholders’ equity for the three months ended June 30, 2012 are as follows:

	Common Stock Shares		Common Stock Amount		Additional Paid-In Capital		Accumulated Deficit			Total
Balance at December 31, 2011		13,519,323	$	8,111	$	24,570	$	(4,612	)	$	28,069
Common stock option exercise and issued		26,159		16		6					22
Share-based compensation expense		−		−		18		−			18
Net income		−		−		−		845			845
Balance at June 30, 2012		13,545,482	$	8,127	$	24,594	$	(3,767	)	$	28,954

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 10 - Commitments and Contingencies

Legal Proceedings

From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. There were no pending material claims or legal matters as of June 30, 2012.

Other

As of June 30, 2012, the Company had purchase orders to suppliers of approximately $2,568.

Significant Customers

Sales to United States government agencies represented approximately $3,781 (40.5%) and $5,197 (37.9%) of the Company’s total sales for the three and six months ended June 30, 2012, respectively, compared with approximately $1,805 (38.6%) and $5,100 (44.8%) for the same periods last year.  Accounts receivable from agencies of the United States government were approximately $2,757 as of June 30, 2012 compared with approximately $765 at the same date last year.

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(Loss) Income per Share

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 8 - (Loss) Income per Share

The following table sets forth the computation of basic and diluted (loss) income per share:

	Three Months Ended					Six Months Ended
	June 30, 2012		June 30, 2011			June 30, 2012		June 30, 2011
Numerator:
Net  income (loss) (numerator for basic and diluted earnings per share)	$	1,246	$	(855	)	$	845	$	(1,543	)
Denominator:
Denominator for basic earnings per share weighted average shares		13,544,273		13,508,815			13,539,111		13,508,815
Effect of dilutive securities:
Options		868		-			1,740		-
Denominator
Denominator for diluted earnings per share weighted average shares		13,545,141		13,508,815			13,540,851		13,508,815
Basic income (loss) per share	$	0.09	$	(0.06	)	$	0.06	$	(0.11	)
Diluted income (loss) per share	$	0.09	$	(0.06	)	$	0.06	$	(0.11	)

A total of 1,030,224 shares related to options are not included in the computation of diluted loss per share for the three and six months ended June 30, 2011 because to do so would have been anti-dilutive for these periods.

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Non-Cash Share-Based Employee Compensation

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 9 - Non-Cash Share-Based Employee Compensation

The Company has employee and non-employee director stock option programs.  Related to these programs, and in accordance with ASC Topic 718, “Compensation-Stock Compensation”, the Company recorded non-cash share-based employee compensation expense of $15 and $3, respectively, for the three and six months ended June 30, 2012, compared with $41 and $91 for the same periods last year.  The Company considers its non-cash share-based employee compensation expenses as a component of cost of products ($0 and $0 for the three and six months ended June 30, 2012, respectively, compared with $4 and $8 for the same periods last year) and selling, general and administrative expenses ($15 and $3 for the three and six months ended June 30, 2012, respectively, compared with $37 and $83 for the same periods last year).  There was no non-cash share–based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented.

The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant.  The non-cash share-based employee compensation expense recorded in the three and six months ended June 30, 2012 was calculated using certain assumptions.  For a description of such assumptions, reference is made to Note 10 (Share-Based Employee Compensation) of the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

A summary of stock option activity under the Company’s stock option plans as of June 30, 2012, and changes during the three months ended June 30, 2012 are presented below:

As of April 1, 2012	Stock Options		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)		Wgt. Avg. Grant Date Fair Value($) Per Share		Aggregate Intrinsic Value ($)
Outstanding		503,444		3.53		-		2.30		-
Vested		473,444		3.63		-		2.40		-
Nonvested		30,000		2.00		-		0.61		-
Period activity
Issued		25,000		2.03		-		0.68		-
Exercised		2,500		0.88		-		0.62		-
Forfeited		-		-		-		-		-
Expired		60,000		5.52		-		2.28		-
As of June 30, 2012
Outstanding		495,944		3.43		4.60		2.24		3,500
Vested		470,944		3.51		4.58		2.33		3,500
Nonvested		25,000		2.03		4.90		0.68		-

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Debt

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 11 - Debt

The Company has a secured revolving credit facility with Silicon Valley Bank with maximum borrowing availability of $5,000 (subject to a borrowing base) and a maturity date of December 31, 2012.  As of June 30, 2012, the Company was in compliance with all covenants under the loan and security agreement, as amended, governing this revolving credit facility.   For a description of such covenants and the other terms and conditions of the loan and security agreement, as amended, reference is made to Note 6 (Debt) of the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011.  As of June 30, 2012, there were no borrowings outstanding under the revolving credit facility and there was approximately $3,284 of borrowing available under the revolving credit facility.

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Non-Cash Share-Based Employee Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Non-Cash Share-Based Employee Compensation Tables

A summary of stock option activity

A summary of stock option activity under the Company’s stock option plans as of June 30, 2012, and changes during the three months ended June 30, 2012 are presented below:

As of April 1, 2012	Stock Options		Wgt. Avg. Exercise Price ($) Per Share		Wgt. Avg. Remaining Contractual Life (Years)		Wgt. Avg. Grant Date Fair Value($) Per Share		Aggregate Intrinsic Value ($)
Outstanding		503,444		3.53		-		2.30		-
Vested		473,444		3.63		-		2.40		-
Nonvested		30,000		2.00		-		0.61		-
Period activity
Issued		25,000		2.03		-		0.68		-
Exercised		2,500		0.88		-		0.62		-
Forfeited		-		-		-		-		-
Expired		60,000		5.52		-		2.28		-
As of June 30, 2012
Outstanding		495,944		3.43		4.60		2.24		3,500
Vested		470,944		3.51		4.58		2.33		3,500
Nonvested		25,000		2.03		4.90		0.68		-

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Capitalized Software (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Capitalized Software Details Narrative
Amortization cost of softwares	$ 220	$ 250	$ 440	$ 500
Net capitalized software costs	$ 2,337		$ 2,337		$ 2,778

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities
Net income (loss)	$ 845	$ (1,543)
Adjustments to reconcile net loss to net cash provided by operating activities:
Allowance for doubtful accounts	(5)
Inventories reserve	(21)	52
Deferred tax obligation	492
Depreciation and amortization	641	704
Share-based compensation expense	18	91
Changes in operating assets and liabilities:
Accounts receivable	(1,391)	1,372
Inventories	914	(1,102)
Prepaid expenses and other current assets	(456)	90
Other assets	18	23
Accounts payable	406	(826)
Accrued compensation and related taxes	397	38
Accrued warranty expense	(4)	20
Note payable	53
Deferred revenue	41	192
Accrued other expenses and other current liabilities	(123)	(46)
Net cash provided by (used in ) operating activities	1,825	(935)
Investing activities
Purchases of property, plant and equipment	(138)	(181)
Net cash used in investing activities	(138)	(181)
Financing activities
Proceeds from issuance of common stock	22
Increase in revolving line of credit		1,500
Decrease in revolving line of credit		(1,200)
Cash provided by financing activities	22	300
Net change in cash and cash equivalents	1,709	(816)
Cash and cash equivalents, beginning of period	2,693	5,050
Cash and cash equivalents, end of period	4,402	4,234
Supplemental disclosure
Cash paid for interest	3	62
Income tax paid	62
Non-cash financing activity
Cashless exercise of stock options and related conversion of net shares to stockholders' equity	$ 4

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Income Taxes

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

NOTE 5 - Income Taxes

Income tax expense totaling approximately $765 and $488 has been recorded for the three and six months ended June 30, 2012.

As of June 30, 2012 and December 31, 2011, the Company’s net deferred tax assets totaled approximately $7,679, and are primarily composed of net operating loss carry forwards (NOLs).  These NOLs total $10,727 for federal and $18,829 for state purposes, with expirations starting in 2017 through 2030.

In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years to utilize its NOLs prior to their expiration.  ASC Topic 740, “Income Taxes”, requires the Company to analyze all positive and negative evidence to determine if, based on the weight of available evidence, the Company is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available, current and anticipated customers, contracts and product introductions, as well as historical operating results and certain tax planning strategies.

The Company has evaluated the available evidence and the likelihood of realizing the benefit of its net deferred tax assets.  From its evaluation the Company has concluded that based on the weight of available evidence, it is more likely than not that the Company will not realize a portion of the benefit of its net deferred tax assets recorded at June 30, 2012.  Accordingly, for the six months ended June 30, 2012, the Company maintained its valuation allowance totaling approximately $250 for the portion of benefit of its federal and state deferred tax assets that more likely than not will not be realized.  The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.  If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2012.

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Stockholders’ Equity (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Balance at December 31, 2011			$ 28,069,000
Common stock option exercise and issued	2,500
Common stock option exercise and issued			22,000
Share-based compensation expense			18,000
Net income	1,246,000	(855,000)	845,000	(1,543,000)
CommonStockMember
Balance at December 31, 2011			13,519,323
Common stock option exercise and issued			26,159
Balance at June 30, 2012	13,545,482		13,545,482
CommonStockAmountMember
Balance at December 31, 2011			8,111,000
Common stock option exercise and issued			16,000
Balance at June 30, 2012	8,127,000		8,127,000
CommonStockIncludingAdditionalPaidInCapitalMember
Balance at December 31, 2011			24,570,000
Common stock option exercise and issued			6,000
Share-based compensation expense			18,000
Balance at June 30, 2012	24,594,000		24,594,000
AccumulatedDeficitMember
Balance at December 31, 2011			(4,612,000)
Net income			845,000
Balance at June 30, 2012	$ (3,767,000)		$ (3,767,000)

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(Loss) Income per Share (Tables)

6 Months Ended

Jun. 30, 2012

Loss Income Per Share Tables

Computation of basic and diluted (loss) income per share

The following table sets forth the computation of basic and diluted (loss) income per share:

	Three Months Ended					Six Months Ended
	June 30, 2012		June 30, 2011			June 30, 2012		June 30, 2011
Numerator:
Net  income (loss) (numerator for basic and diluted earnings per share)	$	1,246	$	(855	)	$	845	$	(1,543	)
Denominator:
Denominator for basic earnings per share weighted average shares		13,544,273		13,508,815			13,539,111		13,508,815
Effect of dilutive securities:
Options		868		-			1,740		-
Denominator
Denominator for diluted earnings per share weighted average shares		13,545,141		13,508,815			13,540,851		13,508,815
Basic income (loss) per share	$	0.09	$	(0.06	)	$	0.06	$	(0.11	)
Diluted income (loss) per share	$	0.09	$	(0.06	)	$	0.06	$	(0.11	)