Note 3 – W.E.T. Acquisition

On May 16, 2011, the Company completed the previously announced acquisition of W.E.T. through our wholly-owned subsidiary, Amerigon Europe. A total of 2,316,175 shares, representing 76.19 percent of the outstanding voting stock of W.E.T., were tendered to Amerigon in response to Amerigon's tender offer of €40 per share. An additional 2,903 shares were tendered at the same price on May 26, 2011 pursuant to an additional acceptance period of the tender offer bringing the total percentage acquired to 76.28. The total purchase price for the acquisition was €92,763, or $130,889, in cash plus the assumption of €36,322, or $51,570, in debt obligations less €12,372, or $17,457, in cash acquired.

As described in Note 1, W.E.T develops, manufactures and distributes heating systems, interior equipment and accessories used in automobile seats and other automotive and electronic applications in the automotive industry. The acquisition is an important strategy for our Company, as we become better positioned to meet the needs of the global automotive market. Bringing together the technical strengths, resources, and diverse product offerings of both companies will allow us to be more responsive to customer requests and requirements.

Prior to the acquisition, Amerigon and W.E.T. were engaged in lawsuits concerning intellectual property. These lawsuits were settled upon consummation of the acquisition. No gain or loss for the lawsuit was recorded in conjunction with the W.E.T. acquisition.

Simultaneous with the execution of the Stock Purchase Agreement (the "SPA"), we and Amerigon Europe also entered into a Business Combination Agreement (the "BCA" collectively, with the SPA, the "Acquisition Agreements") with W.E.T. setting forth the terms and conditions governing our and W.E.T.'s conduct. Among other things, the BCA provides that W.E.T. shall continue to be operated as a separate business and remain a separate legal entity and subsidiary of Amerigon Europe, until certain conditions are satisfied, as described in the paragraph below. In addition, W.E.T. management shall remain substantially unchanged up to and until the occurrence of certain conditions specified in the BCA.

At the first annual meeting of shareholders of W.E.T. following our acquisition, held on August 16, 2011, the shareholders of W.E.T. approved an arrangement by which Amerigon Europe will take management control of W.E.T. and will directly receive W.E.T.'s annual profits and absorb W.E.T.'s annual losses, subject to certain conditions and obligations of Amerigon Europe. Such an arrangement (a "Domination and Profit and Loss Transfer") is somewhat unique to German law and is subject to the terms and conditions applicable thereto under German law. The Domination and Profit and Loss Transfer will go into effect either on January 1, 2011 or, if later, whenever the registration in the W.E.T. corporate register is announced, subject to any delay that may be ordered by German courts.

Under the Domination and Profit and Loss Transfer arrangement: (1) Amerigon Europe will absorb all annual losses incurred by W.E.T., (2) for as long as the Domination and Profit and Loss Transfer remains in effect, the minority shareholders of W.E.T. will be guaranteed a recurring, annual payment (the "Guaranteed Compensation") of EUR 3.71 per share, subject to statutory taxes and deductions, resulting in a net payment of EUR 3.17 per share, and (3) the minority shareholders of W.E.T. can elect to forego the Guaranteed Compensation and instead tender their shares to Amerigon Europe (the "Tender Option") for a one-time cash payment of EUR 44.95 per share (provided that the Tender Option can only be exercised during the two month period after the registration of the Domination and Profit and Loss Transfer is completed. The Domination and Profit and Loss Transfer has an indefinite term, but can be terminated by Amerigon Europe or W.E.T. anytime after five years from the effective date.

Purchase Price Allocation

The purchase price of approximately $130,889, net of cash acquired of $17,457, has been allocated to the values of assets acquired and liabilities assumed as of May 16, 2011. The allocation of the purchase price is preliminary. The Company is in the process of obtaining additional information required to finalize the valuation. An appraisal will be completed to assist management in determining the fair value of acquired assets and assumed liabilities, including identifiable intangible assets. The final purchase price allocation may result in a materially different allocation than that recorded. The purchase price allocation is expected to be finalized by December 31, 2011. The allocation is as follows:


Accounts receivable	$	56,862
Inventory		38,560
Derivative financial instruments		5,862
Deferred income tax assets		26,161
Assets held for sale		10,462
Order backlog		3,073
Prepaid expenses and other assets		8,861
Property and equipment		37,520
Customer relationships		82,823
Technology		23,092
Product development costs		17,859
Goodwill		25,740
Other non-current assets		1,524
Assumed liabilities		(127,275	)
Non-controlling interest		(46,122	)
Assumed debt obligations		(51,570	)

Net assets acquired		113,432
Cash acquired		17,457

Purchase price	$	130,889

The gross contractual amount due of accounts receivable is $59,438 of which $2,576 is expected to be uncollectible.

Supplemental Pro Forma Information

Results of operations for W.E.T. are included in the Company's consolidated condensed financial statements beginning May 16, 2011. The unaudited pro forma combined historical results for the amounts of W.E.T.'s revenue and earnings that would have been included in the Company's consolidated condensed statements of operations had the acquisition date been January 1, 2011 or January 1, 2010 are as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2010			2011		2010
Product revenues	$	109,394		$	371,144	$	310,865
Net income (loss)		(1,587	)		6,021		5,209

The pro forma information includes adjustments for interest expense on debt incurred in conjunction with the acquisition, depreciation and the effect of the amortization of intangible assets recognized in the acquisition. This pro forma information is not necessarily indicative of future operating results.

Goodwill

We recorded goodwill of approximately $25,740 arising from the acquisition. It is estimated that none of the goodwill recognized will be deductible for income tax purposes. A roll forward of goodwill from the acquisition from June 30, 2011 to September 30, 2011 is as follows:


June 30, 2011	25,454
PPA adjustment	818
Exchange rate impact	(1,470	)

September 30, 2011	24,802

Intangible assets

In conjunction with the acquisition, intangible assets of $126,847 were recorded. The Company's estimate of the fair value of these intangible assets at the time of the acquisition is preliminary and will be determined with the assistance of an independent third-party valuation firm. As part of the estimated valuation, an estimated useful life for the intangible assets was determined.

Intangible assets, net consisted of the following (balances are lower as of September 30, 2011 than as of May 16, 2011, the acquisition date, due to fluctuations in foreign currency exchange rates totaling $4,691):


	September 30, 2011
	Gross Value		Accumulated Amortization			Net Value		Useful Life
Customer relationships	$	79,792	$	(3,059	)	$	76,733	10-15 yrs
Order backlog		2,961		(2,961	)		—	0.5 yrs
Technology		22,247		(1,283	)		20,964	8-9 yrs
Product Development Costs		17,156		(548	)		16,608	4 yrs

Total	$	122,156	$	(7,851	)	$	114,305

Amortization of $4,981 and $8,123, for the three and nine months ended September 30, 2011 respectively, was recorded as follows:


	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
Product revenues	$	(2,113	)	$	(3,165	)
Cost of sales		1,332			1,895
Selling, general and administrative expense		1,536			3,063

Amortization expense by year is estimated to be as follows:


October 1, 2011 through December 31, 2011	$	4,064
2012		13,783
2013		13,835
2014		13,835
2015		12,856

Property, Plant & Equipment

Property and equipment consist of the following:


Asset category	Useful life	Amount
Land	Indefinite	$	2,145
Buildings and improvements	20 yrs		12,134
Machinery and equipment	5-7 yrs		14,867
Office furniture and equipment	2-5 yrs		2,560
Computer software	3-5 yrs		5,814

		$	37,520

Non-controlling interest

We recorded the portion of W.E.T. not acquired totaling 23.72 percent at its estimated fair value which was determined by discounted earnings method. During the quarter ended September 30, 2011, W.E.T. sold 16,305 treasury shares of W.E.T. AG to an independent third party buyer at a price of €50 per share, or approximately $67.97 per share. Proceeds from the sale of W.E.T. AG treasury shares were used to pay down the balance on the W.E.T. term loan. The sale of W.E.T. AG treasury shares increased the Company's non-controlling interest to 24.12 percent.