Numerex 10K/A 2009 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2009

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 0-22920

NUMEREX CORP.

(Name of Registrant as Specified in Its Charter)


Pennsylvania		11-2948749
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

1600 Parkwood Circle, Suite 500, Atlanta, GA		30339
(Address of Principal Executive Offices)		(Zip Code)

(770) 693-5950

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:


Class A Common Stock, no par value (Title of each class)		The NASDAQ Stock Market LLC (Name of each exchange on which registered)

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer  Accelerated filer  Non-accelerated filer þ Smaller Reporting Company 

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

The aggregate market value of voting and non-voting common stock held by nonaffiliates of the registrant (9,278,229 shares) based on the closing price of the registrant’s common stock as reported on the NASDAQ Global Market on June 30, 2009, was $46,576,710. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.

The number of shares outstanding of the registrant’s Class A Common Stock as of March 26, 2010, was 15,070,501 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None. The registrant filed its definitive proxy statement pursuant to Regulation 14A on April 6, 2010, which included all of the items that were incorporated by reference to Part III of the Form 10-K filed on March 30, 2010.

EXPLANATORY NOTE

This Amendment on Form 10-K/A (“Amendment No. 1”) constitutes Amendment No. 1 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the “Form 10-K”), which was originally filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2010. Amendment No. 1 is being filed solely to correct a typographical error in the audit report date in Part II, Item 8 of the Form 10-K. Accordingly, an amended audit report is being filed with this Amendment No. 1.

Except for the matter described above, this amendment does not change any previously reported financial results, modify or update disclosures in the Form 10-K, or reflect events occurring after the date of the filing of the Form 10-K, and we have not updated the disclosures in this report to speak as of a later date. Accordingly, this Amendment No. 1 should be read in conjunction with the Form 10-K and our other reports filed with the SEC subsequent to the filing of the Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Balance Sheets as of December 31, 2009 and 2008	4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years ended December 31, 2009, 2008 and 2007	5
Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2009, 2008 and 2007	6
Consolidated Statements of Cash Flows for the Years ended December 31, 2009, 2008 and 2007	7
Notes to Consolidated Financial Statements	9
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements	35

Numerex Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share information)
	December 31,			December 31,
	2009			2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,306		$	8,917
Accounts receivable, less allowance for doubtful accounts of $548 at December 31, 2009 and $1,010 at December 31, 2008		6,341			9,159
Inventory		6,290			8,506
Prepaid expenses and other current assets		1,569			1,508
TOTAL CURRENT ASSETS		19,506			28,090

Property and equipment, net		1,603			1,765
Goodwill, net		23,787			23,771
Other intangibles, net		4,985			5,796
Software, net		2,747			2,796
Other assets		119			288
TOTAL ASSETS	$	52,747		$	62,506

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	5,888		$	7,289
Other current liabilities		2,555			2,943
Notes payable, current		493			2,568
Deferred revenues		1,261			1,134
Obligations under capital leases, current portion		24			29
TOTAL CURRENT LIABILITIES		10,221			13,963

LONG TERM LIABILITIES
Obligations under capital leases and other long term liabilities		335			472
Deferred income tax		154			48
Notes payable		-			7,629
TOTAL LONG TERM LIABILITIES		489			8,149

COMMITMENTS AND CONTINGENCIES (Note M)

SHAREHOLDERS’ EQUITY
Preferred stock - no par value; authorized 3,000,000; none issued		-			-
Class A common stock – no par value; authorized 30,000,000; issued 16,307,963 shares at December 31, 2009 and 15,349,327 shares at December 31, 2008; outstanding 15,082,154 shares at December 31, 2009 and 14,163,518 shares at December 31, 2008		57,430			50,801
Additional paid-in-capital		5,582			4,587
Treasury stock, at cost, 1,225,809 shares at December 31, 2009 and 1,185,809 shares December 31, 2008		(5,213	)		(5,053	)
Class B common stock – no par value; authorized 5,000,000; none issued		-			-
Accumulated other comprehensive loss		-			(8	)
Retained deficit		(15,762	)		(9,933	)
TOTAL SHAREHOLDERS' EQUITY		42,037			40,394
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	52,747		$	62,506

The accompanying notes are an integral part of these financial statements.

Numerex Corp. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share data)

	For the Years
	Ended December 31,
	2009			2008			2007
Hardware	$	20,282		$	43,048		$	43,408
Service		30,554			29,271			24,596
Total net sales		50,836			72,319			68,004
Cost of hardware sales, exclusive of depreciation and amortization		17,319			37,469			38,491
Cost of services, exclusive of depreciation and amortization		11,169			9,430			6,106
Gross profit		22,348			25,420			23,407
Selling, general, and administrative expenses		17,649			20,113			16,320
Engineering and development expenses		2,421			2,198			1,459
Bad debt expense		536			1,102			635
Depreciation and amortization		3,398			3,107			2,493
Goodwill and long-lived asset impairment		-			5,289			-
Operating earnings (loss)		(1,656	)		(6,389	)		2,500
Costs of early extinguishment of debt		(2,936	)		-			-
Interest expense		(1,058	)		(1,665	)		(1,940	)
Interest income		63			134			575
Net other income and (expense)		43			(8	)		33
Earnings (loss) before income taxes		(5,544	)		(7,928	)		1,168
Provision for income taxes		285			3,047			728
Net earnings (loss)		(5,829	)		(10,975	)		440
Other comprehensive income (loss), net of income tax:
Foreign currency translation adjustment		8			(2	)		(8	)
Comprehensive income (loss)	$	(5,821	)	$	(10,977	)	$	432

Basic earnings (loss) per share	$	(0.40	)	$	(0.78	)	$	0.03
Diluted earnings (loss) per share	$	(0.40	)	$	(0.78	)	$	0.03
Weighted average common shares used in per share calculation
Basic		14,409			14,144			13,137
Diluted		14,409			14,144			13,700

The accompanying notes are an integral part of these financial statements.

Numerex Corp. And Subsidiaries
Consolidated Statement Of Shareholders' Equity
	Common Shares									Accumulated Other
					Additional paid		Treasury			Comprehensive			Retained
DESCRIPTION:	Number		$ Amount		in capital		Stock			Income (loss)			Earnings (Deficit)			TOTAL
Balance @ 12/31/06		14,145	$	43,133	$	2,486	$	(5,053	)	$	2		$	852		$	41,420

Adoption of ASC 740-10-25 (previously FIN 48)		-		-		-		-			-			(250	)		(250	)
Issuance of shares under Directors Stock Plan		6		62		-		-			-			-			62
Issuance of shares in connection with employee stock option plan		134		569		-		-			-			-			569
Issuance of shares in connection with purchase of assets of Airdesk, Inc.		100		1,018		-		-			-			-			1,018
Issuance of shares in connection with purchase of assets of Orbit One Communications, Inc.		321		2,673		-		-			-			-			2,673
Translation adjustment		-		-		-		-			(8	)		-			(8	)
Share based compensation		-		-		941		-			-			-			941
Net earnings		-		-		-		-			-			440			440
Balance @ 12/31/07		14,706		47,455	$	3,427	$	(5,053	)	$	(6	)	$	1,042		$	46,865
Issuance of shares under Directors Stock Plan		12		70		-		-			-			-			70
Issuance of shares in connection with employee stock option plan		27		124		-		-			-			-			124
Issuance of shares in connection with purchase of assets of Airdesk, Inc.		200		1,706		-		-			-			-			1,706
Issuance of shares in connection with purchase of Ublip, Inc.		405		1,446										-			1,446
Translation adjustment		-		-		-		-			(2	)		-			(2	)
Share based compensation		-		-		1,160		-			-			-			1,160
Net loss		-		-		-		-			-			(10,975	)		(10,975	)
Balance @ 12/31/08		15,350	$	50,801	$	4,587	$	(5,053	)	$	(8	)	$	(9,933	)	$	40,394

Issuance of shares under Directors Stock Plan	25		103		-		-			-		-			103
Issuance of shares in connection with employee stock option plan	44		41		-		-			-		-			41
Issuance of shares in lieu of debt payment	889		6,485		-		-			-		-			6,485
Translation adjustment	-		-		-		-			8		-			8
Share based compensation	-		-		995		-			-		-			995
Purchase of treasury shares	-		-		-		(160	)		-		-			(160	)
Net loss	-		-		-		-			-		(5,829	)		(5,829	)
Balance @ 12/31/09	16,308	$	57,430	$	5,582	$	(5,213	)	$	-	$	(15,762	)	$	42,037

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	For the years ended December 31,
	2009			2008			2007
Cash flows from operating activities:
Net (loss) earnings	$	(5,829	)	$	(10,975	)	$	440
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:
Depreciation		941			824			699
Amortization		2,457			2,283			1,794
Allowance for Doubtful Accounts		536			1,102			635
Inventory Reserves		110			266			(13	)
Non-cash interest expense		3,297			485			290
Stock option compensation expense		995			1,160			941
Stock issued in lieu of directors fees		104			70			62
Impairment of goodwill		-			3,986			-
Impairment of long-lived assets		-			1,303			-
Deferred income taxes		106			2,776			528
Changes in assets and liabilities which provided (used) cash:
Accounts and notes receivable		2,168			6,035			(5,176	)
Inventory		2,106			1,357			(6,129	)
Prepaid expenses		(138	)		417			411
Other assets		12			42			480
Accounts payable		(1,403	)		(3,133	)		2,586
Other liabilities		(501	)		585			377
Deferred revenues		127			(235	)		(492	)
Income taxes		1			11			(738	)
Net cash provided by (used in) operating activities:		5,089			8,359			(3,305	)
Cash flows from investing activities:
Purchase of property and equipment		(779	)		(453	)		(613	)
Purchase of intangible assets, software and other assets		(1,614	)		(1,544	)		(1,461	)
Purchase of short-term investment		-			-			(8,051	)
Sale of short-term investment, net		-			-			8,051
Purchase of Airdesk, Inc. assets		-			-			-
Purchase of Orbit One Communications, Inc. assets		-			(1,807	)		(6,625	)
Purchase of Ublip, Inc. assets		-			(249	)		-
Net cash used in investing activities		(2,393	)		(4,053	)		(8,699	)
Cash flows from financing activities:
Proceeds from exercise of common stock options		41			124			569
Purchase of treasury stock		(160	)		-			-
Principal payments on capital lease obligations		(29	)		(79	)		(87	)
Principal payments on notes payable and debt		(6,167	)		(2,857	)		(1,429	)
Net cash used in financing activities:		(6,315	)		(2,812	)		(947	)
Effect of exchange differences on cash		8			(2	)		(8	)
Net increase (decrease) in cash and cash equivalents		(3,611	)		1,492			(12,959	)
Cash and cash equivalents at beginning of year		8,917			7,425			20,384
Cash and cash equivalents at end of year	$	5,306		$	8,917		$	7,425

For the years ended December 31,
	2009	2008	2007

Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest	$	697	$	1,196	$	1,444
Income taxes	$	89	$	233	$	17
Disclosure of non-cash financing activities:
Non-cash interest expense	$	860	$	485	$	290
Non-cash inducement cost of extinguishment of debt	$	2,437	$	-	$	-
Non-cash financing payments	$	4,048	$	-	$	-
Non-cash leasehold improvement	$	-	$	127	$	140
Disclosure of non-cash investing activities:
Common stock issued for the purchase of assets of Airdesk, Inc.	$	-	$	1,706	$	1,018
Common stock issued for the purchase of assets of Orbit One Communications, Inc.	$	-	$	-	$	2,673
Common stock issued for the purchase of assets of Ublip, Inc.	$	-	$	1,446	$	-

The accompanying notes are an integral part of these financial statements.

NUMEREX CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2009, 2008 and 2007

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:

1. Nature of Business

Numerex Corp. (NASDAQ: NMRX) is the single source machine-to-machine (M2M) product and service provider to some of the world's largest organizations delivering the foundational components of device, network, and application, used by its customers in the development of their M2M solutions. Customers typically subscribe to Numerex network and application services that are delivered through its hosted platforms. The Company's offerings and expertise enable its customers to efficiently build reliable and secure solutions that are used to monitor and manage assets remotely whenever and wherever needed, while simplifying and speeding up development and deployment. Numerex DNA(TM) offerings include hardware Devices, Network services, and software Applications that are delivered through its Numerex FAST(TM) (Foundation Application Software Technology) platform. Numerex is the first M2M service provider in North America to carry the ISO 27001 information security certification. "Machines Trust Us®" represents the Company's focus on M2M data security, service reliability, and round-the-clock support of its customers' M2M solutions.

2. Principles of Consolidation

The consolidated financial statements include the results of operations and financial position of Numerex and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

3. Revenue Recognition

The Company’s revenue is generated from three sources:

· the supply of hardware, under non recurring agreements,

· the provision of services,

· the provision of data transportation services, under recurring or multi-year contractually based agreements.

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.

The Company recognizes 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. The Company offers customers the right to return hardware that does not function properly within a limited time after delivery. The Company continuously monitors and tracks such hardware returns and records 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, the Company cannot guarantee that it will continue to experience the same return rates that it has 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. Numerex recognizes revenue from the provision of services at the time of the completion, delivery or performance of the service. In the case of revenue derived from maintenance services the Company recognizes revenue ratably over the contract term. In certain instances the Company may, under an appropriate agreement, advance charge for the service to be provided. In these instances the Company recognizes the advance charge as deferred revenue (classified as a liability) and releases the revenue ratably over future periods in accordance with the contract term as the service is completed, delivered or performed. The Company’s revenues in the consolidated statement of operations are net of sales taxes.

The Company recognizes revenue from the provision of data transportation services when it performs the services or processes 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. In certain instances the Company may, under an appropriate agreement, advance charge for the data transport service to be provided. In these instances the Company recognizes the advance charge (even if nonrefundable) as deferred revenue (classified as a liability) and releases the revenue over future periods in accordance with the contract term as the data transport service is delivered or performed.

The Company’s arrangements do not generally include acceptance clauses. However, for those arrangements that include multiple deliverables, we first determine whether each service, or deliverable, meets the separation criteria of counterparty is in accordance with ASC Subtopic 985-605 (American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2, Software Revenue Recognition), ASC Subtopic 605-25 (Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables), and ASC Section 605-10-S99 (Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition). Specifically, if we enter into contracts for the sale of services and hardware, we evaluate whether the services are essential to the functionality of the hardware and whether there is objective fair value evidence for each deliverable in the transaction. If we conclude the services to be provided are not essential to the functionality of the hardware and we can determine objective fair value evidence for each deliverable of the transaction, then we account for each deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of our multiple element arrangements meet these criteria. We may provide multiple services under the terms of an arrangement and are 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 revenues; however, certain judgments and estimates are made and used to determine revenues 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.

4. Cash and Cash Equivalents

Cash equivalents consist of overnight repurchase agreements, money market deposit accounts and amounts on deposit in a foreign bank. Cash of $42,000 and $47,000 at December 31, 2009 and 2008, respectively was held in our foreign bank accounts.

5. Intangible Assets

Intangible assets consist of developed software, patents and acquired intellectual property, customer relationships and goodwill. These assets, except for goodwill, are amortized over their expected useful lives. Developed software is amortized using the straight-line method over 3 to 5 years. Patents and acquired intellectual property are amortized using the straight-line method over 7 to 16 years. Customer relationships are amortized using the straight-line method over 4 years.

We perform an impairment test for goodwill at least annually. This test involves comparing the fair value of each reporting unit as a whole to its carrying value including goodwill. If the reporting unit’s fair value exceeds its carrying value, goodwill is not impaired. If, however, the carrying value of the reporting unit exceeds its fair value, a second step of the impairment test is required. The second test involves comparing an estimate of the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds the implied value, the goodwill is impaired and is written down to the implied fair value. The implied fair value of goodwill is the excess of the fair value of the reporting unit as a whole, over the fair values that would be assigned to its assets and liabilities in a purchase business combination.

During 2008, we recorded an impairment of goodwill of $4.0 million. See Note G (Intangible Assets) for additional information.

We capitalize software development costs when project technological feasibility is established and conclude capitalization when the hardware is ready for release. Software development costs incurred prior to the establishment of technological feasibility are expensed as incurred.

6. 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, whichever is shorter. Depreciation for property and equipment is calculated using the straight-line method over the following estimated lives:

· Short-term leasehold improvements over the term of the lease 3-10 years

· Plant and machinery 4-10 years

· Equipment, fixtures and fittings 3-10 years

7. Impairment of Long-lived Assets

Long-lived assets, such as property and equipment, and purchased 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 by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.

During 2008, we recorded an impairment of long-lived assets of $1.3 million. See Note G (Intangible Assets) for additional information.

8. Income Taxes

The Company accounts 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.

In July 2006, the FASB issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company adopted the guidance on income taxes on January 1, 2007. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. The cumulative effect of applying this guidance on income taxes has been reported as an adjustment to the opening balance of retained earnings as of January 1, 2007.

Applying this guidance to all tax positions resulted in the Company recording a liability for unrecognized tax benefits of $250,000 inclusive of interest and penalties of $24,250 and $11,700, respectively. The $250,000 unrecognized benefit also caused a corresponding decrease to retained earnings as of January 1, 2007. The Company has made an accounting policy election to treat interest and penalties as tax expense. The Company has recorded a net decrease to the liability for unrecognized tax benefits for the year ended December 31, 2009 of approximately $2,000. This amount is made up of an accrual of interest and penalties related to state tax exposure in prior years of approximately $33,000, and approximately $35,000 of tax benefit recognized on the settlement of certain state tax exposure. The Company's total unrecognized tax benefits as of December 31, 2009 were approximately $476,000 inclusive of interest and penalties of $155,000. The Company anticipates a decrease to the balance of total unrecognized tax benefits within the next twelve months of approximately $67,000. If the Company were to recognize these tax benefits, all of the benefit would impact the effective tax rate.

The following table summarizes the activity related to the company's unrecognized tax benefits, net of federal benefit, excluding interest and penalties (in thousands):

(in thousands)	2009			2008
Balance at January 1	$	345		$	297
Increases as a result of positions taken during prior periods		3			-
Decreases as a result of positions taken during prior periods		(27	)		(5	)
Increases as a result of positions taken during current periods		-			53
Decreases as a result of positions taken during current periods		-			-
Balance at December 31	$	321		$	345

During 2009, the company repaid an aggregate of $5.7 million under our outstanding convertible promissory notes. Under generally accepted accounted principles, specifically, ASC 470-20 (formerly FAS 84), an adjustment to the conversion price of the convertible note should be accounted for as an inducement to convert the note, even though there was no economic incentive offered. The expense associated with the inducement is approximately $2.4 million and is not deductible for tax purposes. The permanent impact of the non-cash debt charge is approximately $829,000.

9. Inventory

Inventories, valued at the lower of cost or market, consist of i) M2M Modems & Modules, ii) Security devices and iii) M2M Modems via Satellite. 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.

10. Accounts Receivable and Allowance for Doubtful Accounts

Trade receivables are stated at gross invoiced amount less discounts, other allowances and provision for uncollectible accounts. 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 management’s assessment of a variety of factors related to the general financial condition and business prospects of our customer base. Management reviews the collectability of individual accounts and assesses 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.

11. Notes Receivable

Notes receivable are included in prepaid expenses and other current assets on the accompanying consolidated balance sheets. The notes are payable in installments. The Company recognizes interest on the interest-bearing notes only when interest payments are received. For purposes of valuation, the collectability of notes receivable is evaluated separately to determine if the notes are impaired. Notes receivable are determined to be impaired after all means of collection have been exhausted and the potential for recovery is considered remote. At December 31, 2009 and 2008, all of our notes receivable were determined to be collectible and current.

12. Debt Issuance Costs

Debt issuance costs are included in other assets on the accompanying consolidated balance sheets and are amortized to interest expense over the terms of the related debt.

13. Warrants

The fair value of the warrants associated with notes payable are calculated using the Black-Scholes fair value pricing model. The fair value is amortized on a straight-line basis over the term of the related note. The warrants are included in the balance sheet as a reduction to the note payable.

14. 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 carrying amount of cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value because of their short maturity.

15. Use of Estimates

In preparing our financial statements in conformity with accounting principles generally accepted in the United States of America, 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. Actual results could differ from those estimates.

16. 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 may exceed federally insured limits. We had cash balances in excess of these limits of $5.0 million and $8.7 million at December 31, 2009 and 2008, 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 L for more information.

17. Foreign Currency Translation

The assets and liabilities of our foreign operations are translated into U.S. dollars at current exchange rates, and revenues and expenses are translated at the ending exchange rate from the prior period which materially approximates the 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 the Company.

18. Engineering and Development

Engineering and development expenses 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, 2009, 2008 and 2007 engineering and development costs amounted to $2.4 million, $2.2 million and $1.5 million, respectively.

19. Share-Based Compensation

We measure and recognize compensation expense for all share-based payment awards made to employees and directors. See Note K for additional information.

20. Earnings (Loss) Per Share

Basic net 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 earnings, 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.

21. Advertising Expenses

Advertising expenses are charged to operations in the period in which they are incurred. For the years ended December 31, 2009, 2008 and 2007, advertising costs were approximately $600,000, $905,000 and $526,000, respectively.

22. Recent Accounting Pronouncements

On January 1, 2009, we adopted authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. Adoption of the new guidance did not have a material impact on our financial statements, as we did not have an acquisition in the year ending December 31, 2009; however, we will apply this guidance to business combinations as they are completed in the future.

On January 1, 2009, we adopted the authoritative guidance issued by the FASB that changes the accounting and reporting for non-controlling interests. Non-controlling interests are to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to a non-controlling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value with any gain or loss recognized in net income. Adoption of the new guidance did not have a material impact on our financial statements.

On January 1, 2009, we adopted the authoritative guidance issued by the FASB on fair value measurement for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Adoption of the new guidance did not have a material impact on our financial statements.

On April 1, 2009, we adopted the authoritative guidance issued by the FASB on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly, which clarifies the objective and method of fair value measurement even when there has been a significant decrease in market activity for the asset being measured. Adoption of the new guidance did not have a material impact on our financial statements.

On April 1, 2009, we adopted the authoritative guidance issued by the FASB on disclosures of fair values of financial instruments, which requires the fair value for certain financial instruments to be disclosed in the interim periods, as well as in annual financial statements. Adoption did not have a material impact on our financial statements.

On April 1, 2009, we adopted the authoritative guidance issued by the FASB on the recognition and presentation of other-than-temporary impairments, which is intended to bring greater consistency to the timing of impairment recognition and provide greater clarity about the credit and noncredit components of debt securities whose fair value is below amortized cost and that are not expected to be sold. Increased disclosures regarding expected cash flows, credit losses and an aging of securities with unrealized losses are also required. Adoption of the new guidance did not have a material impact on our financial statements.

On June 30, 2009, we adopted the authoritative guidance issued by the FASB related to subsequent events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Adoption of the new guidance did not have a material impact on our financial statements.

On September 30, 2009, we adopted the FASB Accounting Standards Codification (Codification). The Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental agencies. Adoption of the new guidance did not have a material impact on our financial statements.

RECENT ACCOUNTING GUIDANCE NOT YET ADOPTED

In June 2009, the FASB issued authoritative guidance on the consolidation of variable interest entities, which is effective for us beginning January 1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on our financial statements.

In October 2009, the FASB issued amendments to the accounting and disclosure for revenue recognition. These amendments, effective for fiscal years beginning on or after June 15, 2010 (early adoption is permitted), modify the criteria for recognizing revenue in multiple element arrangements and the scope of what constitutes a non-software deliverable. We believe adoption of this new guidance will not have a material impact on our financial statements.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will become effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning January 1, 2011. Other than requiring additional disclosures, adoption of this new guidance will not have a material impact on our financial statements.

NOTE B – ACQUISITIONS

Ublip, Inc. Acquistion

On October 9, 2008, the Company completed the acquisition of Ublip, Inc. (“Ublip”). The results of Ublip’s operations were included in the consolidated financial statements from October 9, 2008. Ublip is a M2M software and services company based in Dallas, Texas operating in the United States. This acquisition generated approximately $1.6 million in goodwill which the Company believes is appropriate as we now have the ability to provide a full range of comprehensive M2M services to industry through technology that includes middleware designed to simplify application development and deployment and ‘virtual’ hosting architecture.

The assets acquired consist of computer equipment, software, inventory, accounts receivable, and other intellectual property, including Ublip’s ‘Foundation’ software.

Ublip was merged into a wholly-owned subsidiary of Numerex and has been fully integrated into the Company’s operations. The aggregate purchase price of approximately $1.7 million consists of 405,000 shares of restricted Numerex Class A Common Stock, valued at $1.4 million, using the average selling price three days prior and subsequent to the date of the acquisition of $3.56 per share, which approximates the average selling price on the announcement date, and approximately $240,000 in cash.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

(in thousands)
Assets	$	344
Goodwill		1,640
Total assets acquired		1,984

Liabilities assumed		(190	)
Net assets acquired	$	1,794

The $1.6 million of goodwill was assigned to the M2M Services segment. The goodwill is not deductible for income tax purposes.

Orbit One Communications Acquisition

On August 1, 2007, with an effective date of July 31, 2007 the Company completed the acquisition of the assets of Orbit One Communications, Inc. through its wholly owned subsidiary, Orbit One Communications LLC (“Orbit One”). The results of Orbit One’s operations have been included in the consolidated financial statements from August 1, 2007. The assets relate to Orbit One’s satellite-based M2M solutions it provides to government agencies and emergency services markets primarily in the United States. These solutions include hardware, software, data management, installation, maintenance, and use of its proprietary operational support platform. This acquisition initially generated approximately $7.5 million in goodwill which the Company believed was appropriate because it expanded the Company’s M2M hardware and service technologies, it increased penetration into the governmental markets, and improved capabilities to enable M2M applications globally in areas underserved by terrestrial-based and cellular communications providers.

The assets acquired consist of software (including Orbit One’s proprietary mapping and operational support platform), inventory, equipment (primarily communications related computer hardware) accounts receivable, trademarks and other intellectual property.

Initial consideration for the asset purchase was approximately $5.5 million paid in cash plus $384,000 of transaction costs. An additional $732,000 was paid 60 days after closing based on satisfying a net working capital test. In addition, if certain revenue and EBITDA performance objectives and milestones were achieved, subsequent payments could include shares of Numerex Corp’s common stock. If all earn-out objectives were achieved stock payments could be up to 1,100,000 shares of the Company’s Class A common stock. If the performance targets were exceeded, Orbit One could receive up to an additional 471,729 shares of the Company’s Class A common stock and an additional cash payment of $2.5 million. In consequence, approximately 1.6 million shares were issued to an escrow agent for the benefit of Orbit One Communications, Inc. or Numerex as their interests may appear. The earn-out milestones were measured over three periods: (i) from the closing date of the transaction through December 31, 2007; (ii) calendar year 2008; and (iii) calendar year 2009. The Company and Orbit One entered into an escrow agreement, whereby 10% of the cash payments not subject to performance-related milestones were placed in escrow for one year from the closing date in order to settle any indemnification claims under the Agreement and subject to the limitations described therein. Any additional payments of either cash or equity would be reflected as incremental goodwill.

On December 31, 2007 certain revenue and EBITDA targets were met for the first measurement period, ending December 31, 2007. As a result, 320,833 shares of the Company’s Class A common stock were deemed issued to Orbit One Communications, Inc. for purposes of computing common stock dilution. These shares were valued using the average share price on the measurement date for meeting the contingencies on December 31, 2007 of $8.33 per share, thus increasing goodwill by $2.7 million and our common stock by the same amount. An additional $1.8 million in cash was paid in January 2008 after certain customer agreements were extended. These shares, however, remain in escrow and the January 2008 payment of $1.8 million is being disputed as part of a legal action. The earn-out milestones for calendar years 2008 and 2009 were not met.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on August 1, 2007, and updated for the additional cash payment in conjunction with the extension of certain customer agreements.


				Life
				of intangible
(in thousands)	Fair Value			Assets
Net receivables	$	454			-
Prepaid assets		418			-
Inventory		1,162			-
Property, plant and equipment		647			-
Other intangibles, net		940		7 - 10 years
Software, net		1,283		3 - 9 years
Deposits		16			-
Goodwill		7,488		Indefinite
Total assets acquired		12,408


Accrued liabilities		(191	)
Capital lease obligations		(8	)
Contract obligations		(1,103	)
Total liabilities assumed		(1,302	)
Net assets acquired	$	11,106

The $1.3 million of acquired software includes $1.2 million assigned to its proprietary satellite communications, tracking and mapping software. The $940,000 of acquired intangible assets comprised $170,000 assigned to trademarks, and $770,000 assigned to customer relationships. The estimated useful lives for these assets are 10 years for proprietary software, 1 year for trademarks and 9 years for customer relationships. However, the valuation of the assets of Orbit One at the time of the acquisition is the subject of litigation. See Note P for further information.

The $7.4 million of goodwill was assigned to the M2M Services segment. The Company conducted its annual goodwill and long lived asset analysis and assessment for December 31, 2008. As a result of our impairment analysis, with assistance from an external appraisal firm, goodwill was impaired by $3.1 million and thus the fair value was adjusted at December 31, 2008.

The goodwill and intangible assets will be deductible for income tax purposes.

The following unaudited pro-forma consolidated results of operations assume that the acquisition of Orbit One assets was completed as of January 1 for the 12 months period shown below:

	For the Year
	Ended December 31,
(In thousands, except per share data)	2007
Revenues	$	71,952
Net Income	$	836
Earnings Per Common Share	$	0.08
Earnings Per Common Share - diluted	$	0.07

These pro-forma statements have been prepared for comparative purposes only and is not intended to be indicative of what the Company’s results would have been had the acquisition occurred at the beginning of the periods presented or the results which may occur in the future.

Airdesk Acquisition

On January 5, 2006 the Company completed the acquisition of the assets of Airdesk, Inc. through its wholly owned subsidiary, Airdesk LLC (“Airdesk”). The results of Airdesk’s operations have been included in the consolidated financial statements from January 1, 2006. The assets relate to Airdesk’s machine-to-machine (M2M) solutions and services business in the United States and Canada. This acquisition generated approximately $4.2 million in goodwill which the Company believes is appropriate since it aligns Airdesk’s digital M2M hardware and portfolio of industry leading radio modules with our M2M network and services platform. The acquisition of Airdesk also gives the Company presence in multiple vertical segments including utilities, fleet management and point-of-sale terminals.

The assets acquired consist of furniture, fixtures, equipment (consisting of hardware and software), inventory, distribution rights agreements, accounts receivable, trademarks and other intellectual property, including Airdesk’s billing system and “Airsource” database library.

Initial consideration for the asset purchase was approximately $4.2 million payable in the form of shares of the Company’s common stock and the assumption of certain existing indebtedness of Airdesk, Inc. In addition, if certain revenue and other performance targets are achieved, the Company could issue an additional 300,000 shares of its common stock over the three-year period from the date of acquisition. At April 1, 2007 a portion of these targets were achieved and accordingly 100,000 shares were issued at a value of $1.0 million which were valued using the average stock price on date of issuance resulting in an increase to goodwill of $1.0 million and a corresponding increase in common stock. Subsequent to December 31, 2007, the asset purchase agreement was amended to remove the performance targets on the remaining 200,000 un-issued shares with 60,000 shares to be issued on April 1, 2008, 60,000 shares issued on April 1, 2009 and the balance of 80,000 shares issued on April 1, 2010. Since these shares were only time contingent, we recognized the value of these shares on the date of the amendment of January 1, 2008. This resulted in a $1.7 million increase in goodwill and a corresponding increase in common stock. The average selling price on the date of the amendment was $8.53 per share.

The Company assumed approximately $2.5 million of debt, of which $1.2 million was paid in cash at closing of the transaction as a reduction of part of the debt, and the balance of $1.3 million was paid on August 17, 2006. The Company also issued shares of common stock valued at approximately $196,000 to Airdesk, Inc. at closing and deposited the remaining shares of common stock, valued at closing at approximately $1.3 million, with an Escrow Agent. Airdesk, Inc. retains voting and dividend rights to these shares while held in escrow. The Escrow Agent will release the shares of common stock to Airdesk, Inc. over a two-year period in accordance with the terms of the Escrow Agreement. In addition, we incurred approximately $266,000 of direct acquisition expenses that are in addition to the purchase price.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on January 5, 2006 as updated for the additional issuance of shares on April 1, 2007.

(in thousands)
Current assets	$	2,410
Property, plant and equipment		444
Other non-current assets		12
Intangible assets		934
Goodwill		4,232
Total assets acquired		8,032

Current liabilities		(3,346	)
Long-term debt		(700	)
Total liabilities assumed		(4,046	)
Net assets acquired	$	3,986

The $934,000 of acquired intangible assets was comprised of $668,000 assigned to trademarks, $189,000 assigned to customer relationships and $77,000 assigned to a non-compete agreement. The estimated useful life of the customer relationships is 4 years and the estimated useful life of the non-compete agreement is 2 years. The trademarks are not subject to amortization.

The $4.2 million of goodwill was assigned to the M2M Services segment. The goodwill is not deductible for income tax purposes.

NOTE C – ACCOUNTS RECEIVABLE

Accounts receivables and related allowance for doubtful accounts consisted of the following:

	December 31,
(In thousands)	2009			2008
Accounts receivable	$	6,406		$	9,952
Unbilled accounts receivable		483			217
Allowance for doubtful accounts		(548	)		(1,010	)
Accounts receivable	$	6,341		$	9,159

NOTE D – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	December 31,		December 31,
(In thousands)	2009		2008

Notes receivable	$	1,029	$	916
Prepaid expenses		517		380
Debt issuance costs		5		196
Misc. and employee receivables		18		16
	$	1,569	$	1,508

At December 31, 2009 and 2008, we had one note receivable, with a 10% interest rate, of $1.0 million and $916,000, respectively.

NOTE E – INVENTORY

Inventory consisted of the following:

	December 31,
(In thousands)	2009			2008
Raw materials	$	1,503		$	2,710
Work-in-progress		14			14
Finished goods		5,212			6,388
Less reserve for obsolescence		(439	)		(606	)
Inventory, net	$	6,290		$	8,506

NOTE F – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	December 31,
(In thousands)	2009			2008
Leasehold improvements	$	1,391		$	1,228
Plant and machinery		10,577			10,004
Equipment, fixtures, fittings		831			810
Total property and equipment		12,799			12,042
Accumulated depreciation		(11,196	)		(10,277	)
Property and equipment, net	$	1,603		$	1,765

NOTE G – INTANGIBLE ASSETS

The following table provides a summary of the components of our intangible assets:

	For the Year ended December 31, 2009			For the Year ended December 31, 2008
M2M Services
Balance at the beginning of the period
Goodwill	$	25,905		$	20,728
Accumulated impairment losses		(3,060	)		-
		22,845			20,728

Acquisition of Ublip, Inc.		16			1,640
Acquisition of assets of Airdesk, Inc.		-			1,706
Acquisition of assets of Orbit One, Inc.		-			1,831
Impairment of goodwill of Orbit One, Inc.		-			(3,060	)
Balance at the end of the period
Goodwill		25,921			25,905
Accumulated impairment losses		(3,060	)		(3,060	)
		22,861			22,845

Wireline Services
Balance at the beginning of the period
Goodwill		4,015			4,015
Accumulated impairment losses		(3,089	)		(2,140	)
		926			1,875
Impairment of goodwill		-			(949	)
Balance at the end of the period
Goodwill		4,015			4,015
Accumulated impairment losses		(3,089	)		(3,089	)
		926			926
Total at end of period	$	23,787		$	23,771

During 2009 and 2008, we prepared an analysis using standard modeling techniques to estimate a fair market value for each of the three reporting units with goodwill: M2M Services, Orbit One, LLC and Wireline Services and for 2008 we had an additional reporting unit of Airdesk. At the beginning of 2009 it was necessary to combine the Airdesk reporting unit with the M2M Services reporting unit as it had been so integrated with the M2M Services reporting unit that it was no longer possible to report discrete financial information for the Airdesk reporting unit. 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 used historical information, our subsequent year business plan and expected future development projects to prepare six year financial projections used in the discounted cash flow analysis for each of the reporting units.

During 2009, we did not record goodwill or long-lived intangible asset impairment charges. During 2008, we recorded a pre-tax goodwill and long-lived intangible asset impairment, of $5.3 million, $4.3 million of which was attributable to Orbit One as detailed in the prior note and $1.0 million related to our Wireline Services reporting unit.

The Company did not incur costs to renew or extend the term of acquired intangible assets during the year ending December 31, 2009. Intangible assets, which will continue to be amortized, consisted of the following (in thousands):

	December 31, 2009							December 31, 2008
	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased and developed software	$	8,344	$	(5,597	)	$	2,747	$	7,272	$	(4,476	)	$	2,796
Patents, trade and service marks		13,397		(9,106	)		4,291		13,116		(8,124	)		4,992
Intangible and other assets		1,523		(829	)		694		1,278		(474	)		804
Total Intangible and other assets	$	23,264	$	(15,532	)	$	7,732	$	21,666	$	(13,074	)	$	8,592

At December 31, 2009 and 2008, the Company had capitalized approximately $916,000 and $823,000 of internally generated software development costs, respectively. Amortization of capitalized software development costs for the years ended December 31, 2009 and 2008 was $910,000 and $706,000, respectively.

The Company expects amortization expense for the next five years and thereafter to be as follows based on intangible assets as of December 31, 2009 (in thousands):

2010	$ 2.6 million
2011	1.7 million
2012	1.4 million
2013	1.0 million
2014	0.6 million
Thereafter	0.4 million
Total	$ 7.7 million

NOTE H – OTHER ASSETS

Other assets consisted of the following:

	December 31,		December 31,
(In thousands)	2009		2008

Deposits long term	$	119	$	130
Debt issuance costs		-		158
	$	119	$	288

The long-term portion of debt issuance costs were $556,000, less accumulated amortization of approximately $556,000, at December 31, 2009, and $556,000, less accumulated amortization of approximately $398,000, at December 31, 2008.

NOTE I – INCOME TAXES

The provision for income taxes consisted of the following:

	December 31,
(in thousands)	2009			2008		2007

Current:
Federal	$	-		$	26	$	43
State		132			95		17
Foreign		49			54		-
Reserve for Uncertain Tax Positions		(2	)		106		140
Deferred:
Federal		98			2,664		529
State		8			102		(1	)
	$	285		$	3,047	$	728

Income taxes recorded by the Company 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 expense (benefit) at the statutory rate and the actual income tax expense as reflected in the consolidated statements of operations for the respective periods:

(in thousands)	December 31,
	2009			2008			2007
Income tax (benefit) computed at
U.S. corporate tax rate of 34%	$	(1,885	)	$	(2,695	)	$	377
Adjustments attributable to:
Deferred Balance True Up		(13	)		(173	)		639
State Net Operating Losses		-			-			(93	)
Valuation allowance		991			4,035			(554	)
State Tax		(11	)		67			11
Foreign Tax		(25	)		30			(7	)
Reserve for Uncertain Tax Positions		(2	)		106			140
Non-deductible expenses		272			284			215
Non-cash debt charge		829			-			-
Goodwill impairment		-			1,263			-
Expiration of net operating loss		-			98			-
Stock Option Shortfall		131			-			-
Other		(2	)		32			-
	$	285		$	3,047		$	728

The components of the Company’s net deferred tax assets and liabilities are as follows:

(in thousands)	December 31,
	2009			2008
Current deferred tax asset
Inventories	$	349		$	327
Accruals		99			85
Net operating loss carry forward		-			-
Other		395			395
Valuation allowance		(786	)		(807	)
		57			-
Non-Current deferred tax asset
Intangibles		1,821			1,321
Foreign NOL carry forward		-			-
Net operating loss carry forward		7,788			7,270
Tax credit carry forward		1,303			1,303
Difference between book and tax
Basis of property		(818	)		(580	)
Other		402			227
Valuation allowance		(10,553	)		(9,541	)
		(57	)		-
Deferred Tax Liabilities
Goodwill		(154	)		(48	)
Net Deferred Tax Liabilities	$	(154	)	$	(48	)

Management has provided a full valuation allowance on deferred tax assets. Management intends to maintain this valuation allowance until sufficient positive evidence exists to support reversal of the valuation allowance. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance.

The future taxable income expected from the reversal of temporary differences (deferred tax liabilities) is being offset by net operating loss carryforwards (deferred tax assets) with the exception of the deferred tax liability generated from the amortization of tax deductible goodwill which has an indefinite period of reversal. Because the reversal of goodwill amortization cannot be assumed to reverse during the statutory carryforward period of the Company's NOL's, this liability is isolated and presented gross in the amount of $154,000 as a long term liability in the Statement of Financial Position.

Net operating loss carry forwards available at December 31, 2009, expire as follows:

(in thousands)			Year of
	Amount		Expiration

Federal operating losses	$	14,447		2021-2029
State operating losses	$	53,165		2017-2029
Minimum Tax Credit Carryforward	$	738		N/A
General Business Credit Carryforward	$	565		2015-2022

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projections of future taxable income, tax planning strategies and the reversal of temporary differences in making this assessment. Cumulative losses incurred in recent years and the potential impact of the current economic environment on future taxable income represented sufficient negative evidence to require a full valuation allowance. As such, at December 31, 2008 management established a full valuation allowance against the net deferred tax assets, which remains at December 31, 2009 and until sufficient positive evidence exists to support reversal. Deferred tax assets generated during the current year primarily due to net operating losses were also offset by an increase to the valuation allowance resulting in no net benefit recorded in the current year. Future reversals or increases to the valuation allowance could have a significant impact on our future earnings.

The company files U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2006 through 2008 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.

NOTE J – NOTES PAYABLE

On December 29, 2006, the Company completed a private placement to Laurus Master Fund, Ltd. (“Laurus”) of (i) a convertible term note in the principal amount of $10,000,000 (“Note C”), and (ii) a warrant to purchase up to 158,562 shares of our common stock. Interest accrues on this note at a rate of 9.50% annually. This note has a four year term and is secured by substantially all of our assets. Note C was fully repaid at December 31, 2009. The fair value of the warrant associated with Note C on December 29, 2006 was $735,000 and was calculated using the Black-Scholes fair value pricing model.

On May 30, 2006, the Company completed a private placement to Laurus Master Fund, Ltd. (“Laurus”) of (i) a convertible term note in the principal amount of $5,000,000 (“Note A”) (ii) a non-convertible term note in the principal amount of $5,000,000 (“Note B”), and (iii) a warrant to purchase up to 241,379 shares of our common stock. Interest accrues on each of the notes at a rate of 9.75% annually. Both notes have four year terms and are secured by substantially all of our assets. The fair value of the warrant associated with Note A and Note B on May 30, 2006 was $846,000 and was calculated using the Black-Scholes fair value pricing model.

Interest under Note B must be paid in cash. The principal balance on Note B is due and payable in cash on May 30, 2010. The Company fully repaid Note B on January 8, 2010.

The Company may only use common stock to make payments on convertible Note A if the price per share of the common stock for the required number of trading days immediately prior to conversion is greater than $8.70. The holder of the convertible note may convert the entire principal amount of the convertible note, and any accrued interest thereon, into the Company’s common stock at a fixed conversion price equal to $7.91 per share.

In consideration of the above private placements and other private placements for term notes, the Company issued to Laurus warrants to purchase our common stock, the terms of which are summarized as follows:

Number of Securities		Common Stock Exercise Price		Expiration Date
	150,000	$	4.75	January 13, 2011
	100,000		5.17	January 13, 2011
	116,000		5.99	January 13, 2011
	50,000		5.51	January 28, 2012
	50,000		5.72	January 28, 2012
	241,379		7.73	May 30, 2013
	158,562		10.13	December 29, 2013

During 2009, we made additional debt payments of $4.5 million in cash and converted $4.047 million of outstanding debt associated with financings in May 2006 and December 2006. This conversion of outstanding debt to equity resulted in the issuance of 888,817 shares of the Company’s Class A Common Stock at a conversion price ranging from $4.42 - $4.65 per share, as agreed upon by the parties. Though no economic incentive was offered, we are required to account for the inducement conversion under ASC 470-20 (previously SFAS No. 84 “Induced Conversions of Convertible Debt”). We recognized non-cash debt conversion charges of $2.4 million, which equaled the excess of the fair value of the common stock issued over the fair value of the common stock issuable pursuant to the original conversion terms. We recorded $499,000 in interest expense as a result of expensing the deferred fees associated with the debt.

As of December 31, 2009, the Company had $500,000 outstanding under Note B and none outstanding under Note C. As of December 31, 2009, the Company had a balance of $7,300 for the unamortized warrant associated with Note B and none for the unamortized warrant associated with Note C. The Company fully repaid Note B on January 8, 2010.

Laurus is an "accredited investor" as defined in Rule 501(d) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). The Company issued the securities to Laurus in reliance on the exemption from registration provided by Section 4(2) under the Securities Act.

NOTE K – SHARE-BASED COMPENSATION

For the years ended December 31, 2009, 2008 and 2007 share-based compensation expense was $995,000, $1.2 million and $941,000, respectively. Share-based compensation consisted of expense related to employee equity awards. Total unrecognized compensation related to unvested share-based awards granted to employees and members of our board of directors at December 31, 2009, net of estimated forfeitures, is $1.0 million and is expected to be recognized over a weighted-average period of 1.3 years.

Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Share-based compensation expense recognized in the Company’s Consolidated Statement of Operations for the year ended December 31, 2009, 2008 and 2007 included compensation expense for share-based payment awards granted prior to, but not yet vested as of December 31, 2005 based on the grant date fair value estimate and compensation expense for the share-based payment awards granted subsequent to December 31, 2005. The Company will continue to use the method of attributing the value of share-based compensation costs to expense on the straight-line method. As stock-based compensation expense recognized in the Consolidated Statement of Operations for the years ended December 31, 2009, 2008 and 2007 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The fair value of share-based payment awards is estimated at the grant date using the Black-Scholes option valuation model. The Company’s determination of fair value of share-based payment awards on the date of grant using the option-pricing model is affected by the Company’s stock price, as well as management’s assumptions. These variables include, but are not limited to; the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

The Company has outstanding stock options granted pursuant to four stock option plans. The 1994 Long-Term Incentive Plan (the “1994 Plan”), which was adopted in 1994, the Non-Employee Director Stock Option Plan (the “Director Plan”) which was adopted in 1996, 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 1994 Plan and the Director Plan were terminated and replaced by the 1999 Plan which was effective for options granted from October 25, 1999. The 1999 Plan was terminated and replaced by the 2006 Plan. Options outstanding under the 1994 Plan, the Director Plan and the 1999 Plan remain in effect, but no new options may be granted under those plans. Options issued under the 2006 Plan and the 1999 Plan typically vest ratably over a four-year period. All options issued under the 1994 Plan are fully vested.

The aggregate number of shares which may be issued under the 2006 plan is 750,000 shares of Class A Common Stock (“Shares”) plus (i) any available Shares under the 1999 Plan as of its termination date and (ii) Shares subject to options granted under the 1999 Plan that expire or terminate without having been fully exercised. A summary of the company's stock option activity and related information for the years ended December 31, 2009, 2008 and 2007 follows:

				Weighted		Weighted	Weighted Avg.		Aggregate
				Average		Average Remaining	Grant Date		Intrinsic
	Shares			Ex. Price		Contractual Life (Yrs)	Fair Value		Value
Outstanding, at 12/31/06		1,784,865		$	5.55
Options granted		301,500			8.47		$	4.69
Options exercised		(133,830	)		4.80				$	777,777
Options cancelled		(26,063	)		5.62
Options expired		(250	)		4.57
Outstanding, at 12/31/07		1,926,222			6.06
Options granted		199,500			5.39		$	3.34
Options exercised		(26,541	)		4.53				$	49,356
Options cancelled		(54,188	)		7.65
Options expired		(39,272	)		5.96
Outstanding, at 12/31/08		2,005,721			5.97				$	383,626
Options granted		140,500			4.38		$	2.81
Options exercised		(124,500	)		3.63				$	90,800
Options cancelled		(141,875	)		7.83
Options expired		(41,750	)		6.26
Outstanding, at 12/31/09		1,838,096			5.86	5.17			$	632,057
Exercisable, at 12/31/09		1,449,843			5.85	4.30			$	582,174

The following table summarizes information related to fixed stock options outstanding at December 31, 2009:

		Options outstanding						Options exercisable
Range of exercise prices		Number outstanding at December 31, 2009		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable at December 31, 2009		Weighted average exercise price
$	1.00 – 4.00		454,664		4.56	$	2.93		398,415	$	2.86
	4.01 – 8.00		923,932		5.70	$	5.57		664,118	$	5.62
	8.01 – 12.94		459,500		4.69	$	9.32		387,310	$	9.31
			1,838,096		5.17	$	5.86		1,449,843	$	5.85

The fair value of options at date of grant was estimated using the Black-Scholes option pricing model. 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 management 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 life 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 voluntary termination behavior, as well as an analysis of actual option forfeitures. Dividend yield is zero as there are no payments of dividends. With regard to the estimate of the expected life, we consider the exercise behavior of past grants and model the pattern of aggregate exercises.

A summary of the status of the Company’s nonvested shares as of December 31, 2009, and changes during the year ended December 31, 2009, is presented below:

				Weighted
				Average
				Grant-date
Nonvested Shares	Shares			Fair Value
Nonvested at January 1, 2009		547,440		$	4.09
Options granted		140,500			2.81
Options vested		(116,061	)		3.45
Options forfeited		(183,625	)		4.45
Nonvested at December 31, 2009		388,254			3.60

The total fair value of shares vested during the years ended December 31, 2009, 2008 and 2007 was $1.0 million, $1.3 million and $868,000, respectively.

The key assumptions used in the valuation model during the twelve months ended December 31, 2009, 2008 and 2007 are provided below:

	Twelve Months Ended
	December 31,
	2009	2008	2007
Valuation Assumptions:
Volatility	70.70%	69.73%	57.24%
Expected term	6.3	6.3	6.3
Risk free interest rate	2.48%	3.15%	4.29%
Dividend yield	0.00%	0.00%	0.00%

NOTE L – SIGNIFICANT CUSTOMER, CONCENTRATION OF CREDIT RISK AND RELATED PARTIES

One customer accounted for approximately 14.7% of consolidated revenue for the year ended December 31, 2009, principally from our M2M Services segment. Accounts receivable from this customer was approximately $140,000 at December 31, 2009. Two customers accounted for 15.3% and 10.3%, respectively, of outstanding accounts receivable at December 31, 2009. One customer accounted for approximately 22% of consolidated revenue for the year ended December 31, 2008, principally from our M2M Services segment. Accounts receivable from this customer was $1.3 million at December 31, 2008. One customer accounted for approximately 13% of consolidated revenue for the year ended December 31, 2007, principally from our M2M Services segment. Accounts receivable from this customer was $3.0 million at December 31, 2007, which is approximately 18% of total accounts receivable.

We had two suppliers from which our purchases were approximately 44.2% of our hardware cost of sales for the year ended December 31, 2009. Our accounts payable to these suppliers was approximately $1.0 million at December 31, 2009. We had two suppliers from which our purchases were approximately 67% of our hardware cost of sales for the year ended December 31, 2008. Our accounts payable to these suppliers was approximately $3.6 million at December 31, 2008. We had two suppliers from which our purchases were approximately 57% of cost of hardware sales for the year ended December 31, 2007. The components included in the hardware purchased from this supplier can be sourced from other suppliers.

We conducted business with one related party during the year ended December 31, 2009. Mr. Ryan, a director on the Company’s Board of Directors is also partner in the law firm of Salisbury & Ryan LLP. Salisbury & Ryan LLP provided legal services to the Company in 2009 and will continue to provide such services during 2010. During the year ended December 31, 2009, 2008, and 2007 Salisbury & Ryan LLP charged legal fees of approximately $358,000, $762,000 and $277,000, respectively. Our accounts payable to Salisbury & Ryan LLP was $28,000 and $201,000 at December 31, 2009 and 2008, respectively.

NOTE M – COMMITMENTS AND CONTINGENCIES

Capital Leases

We conduct a portion of our operations with leased equipment. For financial reporting purposes, minimum lease rentals relating to the equipment have been capitalized.

The related assets and obligations have been recorded using our incremental borrowing rate at the inception of the lease. The leases expire at various dates through 2011. The gross value of the assets financed by the lease obligations at the inception of the leases was $157,000. The net carrying value of assets financed by capital lease obligations approximated $30,000 as of December 31, 2009. The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2009, (in thousands).

2010	$	26
2011		7
Total minimum lease payments		33
Less amount representing interest		(3	)
Present value of net minimum lease payments	$	30

Subsequent to year end the Company entered into an agreement to acquire certain equipment for approximately $900,000.

Operating Leases

We lease certain property and equipment under non-cancelable operating leases with initial terms in excess of one year, through 2013. Future minimum lease payments under such non-cancelable operating leases subsequent to December 31, 2009, (in thousands) are as follows:

2010	$	952
2011		887
2012		565
2013		-
Total minimum lease payments	$	2,404

Rent expense, including short-term leases, amounted to approximately $1.0 million, $1.1 million and $938,000 for the years ended December 31, 2009, 2008 and 2007, respectively.

NOTE N – BENEFIT PLAN

We sponsor a 401(k) savings and investment plan, a plan that covers all eligible employees of Numerex Corp and its subsidiaries. Employees are eligible for participation on the enrollment date following six months of service. We contribute an amount equal to 50% of the portion of the employee’s elective deferral contribution that do not exceed 6% of the employee’s total compensation for each payroll period in which an elective deferral is made. Our contribution is made in cash on a monthly basis. Our matching contributions are vested over a three year period at a rate of 33% per year. Approximately $179,000, $182,000 and $151,000 were expensed for the years ended December 31, 2009, 2008 and 2007, respectively.

NOTE O – EARNINGS (LOSS) PER SHARE

The numerator in calculating both basic and diluted net earnings (loss) per share for each period is net earnings (loss). The denominator is based on the following number of common shares:

	For the years ended December 31,
(In thousands, except per share data)	2009			2008			2007
Common Shares:
Weighted average common shares outstanding		14,409			14,144			13,137
Dilutive effect of common stock equivalents		-			-			563
Total		14,409			14,144			13,700
Net earnings (loss)	$	(5,829	)	$	(10,975	)	$	440
Net earnings (loss) per common share:
Basic	$	(0.40	)	$	(0.78	)	$	0.03
Diluted	$	(0.40	)	$	(0.78	)	$	0.03

For the year ended December 31, 2009 and 2008, the effect of our 1,838,096 and 2,005,721 stock options and warrants was not included, respectively, in the computation of diluted earnings per share as their effect was anti-dilutive.

For the years ended December 31, 2007, we excluded antidilutive options of 239,692 shares of common stock and common stock equivalents from the computation of diluted earnings per share, as the exercise prices of those shares were greater than the average market price of the common stock during the applicable period.

In connection with the acquisition of the assets of Orbit One Communications, , the Company issued an additional 1,250,596 shares of the Company’s common stock. These shares are currently held in escrow for the benefit of Orbit One or Numerex, as their interest may appear in the future, and are not included in the basic and diluted share calculation. The shares could be released depending on the outcome of the litigation described in Note P below.

NOTE P – LEGAL PROCEEDINGS

On January 7, 2008 Orbit One Communications, Inc. (“Orbit One”) and David Ronsen (“Ronsen”) filed an action against Numerex in New York State Supreme Court, County of New York, alleging, inter alia, breach of contract in frustrating Orbit One’s ability to achieve earn out targets in the acquisition and employment agreements. Plaintiffs are claiming $20 million in damages. On January 25, 2008 Numerex removed the action to the United States District Court, Southern District of New York. On March 11, 2008 Numerex answered and counterclaimed asserting, inter alia, breach of fiduciary duty and declaratory relief. On September 23, 2008, Orbit One, Ronsen and related entities commenced an action in the District of Montana seeking to declare Ronsen’s non-compete obligations void. On December 9, 2008, the court transferred the case to the United States District Court for the Southern District of New York. On January 7, 2009, the court held a hearing on plaintiffs’ motion for a preliminary injunction. On January 21, 2009, the Court denied plaintiffs’ motion for a preliminary injunction. On January 30, 2009, Numerex filed counterclaims against plaintiffs for fraud, theft of trade secrets and confidential information and breach of the Asset Purchase Agreement; and from Ronsen, Naden and Rosenzweig for breach of their fiduciary duties and duty of loyalty to Numerex, as well as breach of their respective Severance Agreements. On February 24, 2009, the court consolidated the actions and ordered the parties to complete their discovery by February 27, 2009. Discovery has been completed. On April 17, 2009, the parties filed cross-motions for summary judgment. On March 12, 2010, the Court entered a decision on the cross-motions for summary judgment. The Court held that Mr. Ronsen’s claim that he had “good reason” to resign presented material issues of fact requiring a trial. Similarly, the Court held that Numerex’s claims against Orbit One and its principals for breach of contract, fraudulent inducement, breach of fiduciary duty, and other related claims presented material issues of fact requiring a trial. No trial date has been set. Numerex believes that the plaintiffs' claims are without merit and intends to defend against the allegations and to vigorously pursue its counterclaims.

NOTE Q – SEGMENT INFORMATION

The Company has two reportable operating segments. These segments are M2M Services and Wireline Services. The M2M Services segment is made up of all our cellular and satellite machine-to-machine communications hardware and services. The Wireline Services segment includes our networking hardware and services, video conferencing hardware, and our wire-line security detection hardware.

The Company’s chief operating decision maker is the Chief Executive Officer (CEO). While the CEO is apprised of a variety of financial metrics and information, the Company’s business is principally managed on a segment basis, with the CEO evaluating performance based upon segment operating profit or loss that includes an allocation of common expenses, but excludes certain unallocated expenses. The CEO does not view segment results below operating profit (loss) before unallocated costs, and therefore unallocated expenses, interest income and other, net, and the provision for income taxes are not broken out by segment. Items below segment operating profit/(loss) are reviewed on a consolidated basis.

Summarized below are the Company’s revenues and operating earnings (loss) by reportable segment.

Certain Corporate expenses are allocated to the segments based on segment revenues.

	For the years ended December 31,
(In thousands, except per share data)	2009			2008			2007

Revenues:
M2M Services	$	47,381		$	66,149		$	62,825
Wireline Services		3,455			6,170			5,179
	$	50,836		$	72,319		$	68,004
Operating earnings (loss):
M2M Services	$	3,382		$	(6,729	)	$	2,374
Wireline Services		1,162			916			680
Unallocated Corporate		(6,200	)		(576	)		(554	)
	$	(1,656	)	$	(6,389	)	$	2,500
Depreciation and amortization:
M2M Services	$	2,754		$	1,589		$	1,801
Wireline Services		27			965			194
Unallocated Corporate		617			553			498
	$	3,398		$	3,107		$	2,493

	Dec. 31,			Dec. 31,
Identifiable Assets:		2009			2008
M2M Services	$	43,739		$	49,598
Wireline Services		2,181			2,168
Unallocated Corporate		6,827			10,740
	$	52,747		$	62,506

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

Board of Directors and Shareholders

Numerex Corp. and subsidiaries

We have audited the accompanying balance sheets of Numerex Corp. (a Pennsylvania corporation) and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15 (a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Numerex Corp. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation of the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note A, the Company adopted new accounting guidance on January 1, 2007 related to the accounting for uncertainty in income tax reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Numerex Corp. and subsidiaries’ internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 29, 2010 expressed an unqualified opinion thereon.

/s/ Grant Thornton, LLP

Atlanta, Georgia

March 29, 2010

PART IV

Item 15. Exhibits and Financial Statement Schedules

31.1	Rule 13a-14(a) Certification of Chief Executive Officer *

31.2	Rule 13a-14(a) Certification of Chief Financial Officer *

32.1	Rule 13a-14(b) Certification of Chief Executive Officer *

32.2	Rule 13a-14(b) Certification of Chief Financial Officer *

* Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. .

NUMEREX CORP.

By:/s/ Stratton J. Nicolaides

Stratton J. Nicolaides

Chairman and Chief Executive Officer

Date: April 20, 2010

Numerex (NMRX) Inactive 10-K/A2009 FY Annual report (amended)