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<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">   <div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left"> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Basis of Presentation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying interim unaudited condensed consolidated financial statements have been prepared by LoJack Corporation and its subsidiaries, or “LoJack”, “we”, “our”, or “the Company”, without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. The unaudited condensed consolidated financial statements include the accounts of LoJack, our wholly-owned subsidiaries, and SC-Integrity, or SCI. We consolidate entities which we own or control. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of our management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of June 30, 2011, and the results of operations for the three and six months ended June 30, 2011 and 2010 and cash flows for the six months ended June 30, 2011 and 2010. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010, which includes consolidated financial statements and notes thereto for the year ended December 31, 2010. </div> </div>

<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Earnings Per Share</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Basic earnings per common share is computed using the weighted average number of common shares outstanding during each period. Diluted earnings per common share is computed using the weighted average number of common shares outstanding during the year and includes the effect of our outstanding stock options and unvested stock (using the treasury stock method), except where such stock options or unvested stock would be antidilutive. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A reconciliation of weighted average shares used for the basic and diluted computations for the three and six months ended June 30, 2011 and 2010 is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Three Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average shares for basic </div></td> <td> </td> <td> </td> <td align="right">17,596,872</td> <td> </td> <td> </td> <td> </td> <td align="right">17,338,904</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Dilutive effect of stock options and unvested restricted stock </div></td> <td> </td> <td> </td> <td align="right">394,690</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average shares for diluted </div></td> <td> </td> <td> </td> <td align="right">17,991,562</td> <td> </td> <td> </td> <td> </td> <td align="right">17,338,904</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Six Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Six Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average shares for basic </div></td> <td> </td> <td> </td> <td align="right">17,564,203</td> <td> </td> <td> </td> <td> </td> <td align="right">17,305,941</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Dilutive effect of stock options and unvested restricted stock </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average shares for diluted </div></td> <td> </td> <td> </td> <td align="right">17,564,203</td> <td> </td> <td> </td> <td> </td> <td align="right">17,305,941</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Because of the net losses reported for the six months ended June 30, 2011 and the three and six months ended June 30, 2010, all shares of stock issuable pursuant to stock options and unvested stock have not been considered for dilution as their effect would be antidilutive. For the three months ended June 30, 2011, 1,953,165 stock options and 134,445 shares of restricted stock were excluded from the computation of diluted net loss per share because the effect of including such shares would be antidilutive. For the six months ended June 30, 2011, 2,454,430 stock options and 804,550 shares of restricted stock were excluded from the computation of diluted net loss per share. For the three and six months ended June 30, 2010, 2,729,295 stock options and 1,085,205 shares of unvested restricted stock were excluded from the computation of diluted net loss per share. Performance shares totaling 51,589 and 141,225 were excluded from the computation of earnings per share for the three and six months ended June 30, 2011 and 2010, respectively, because the performance conditions had not been achieved at the respective balance sheet dates. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Inventories</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Inventories are classified as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Raw materials </div></td> <td> </td> <td align="left">$</td> <td align="right">110</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">333</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Work in process </div></td> <td> </td> <td> </td> <td align="right">122</td> <td> </td> <td> </td> <td> </td> <td align="right">314</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Finished goods, net </div></td> <td> </td> <td> </td> <td align="right">9,191</td> <td> </td> <td> </td> <td> </td> <td align="right">7,859</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total inventories </div></td> <td> </td> <td align="left">$</td> <td align="right">9,423</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">8,506</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Stock Compensation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"> <b><i>Stock Options</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents activity of all stock options for the six month period ended June 30, 2011: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Exercise</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Contractual Term</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Value</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Options</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(in years)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(in thousands)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Outstanding at January 1, 2011 </div></td> <td> </td> <td> </td> <td align="right">2,261,565</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7.28</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Granted </div></td> <td> </td> <td> </td> <td align="right">395,638</td> <td> </td> <td> </td> <td> </td> <td align="right">5.72</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Exercised </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(8,000</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">4.79</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Cancelled, expired or forfeited </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(194,773</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">5.08</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Outstanding at June 30, 2011 </div></td> <td> </td> <td> </td> <td align="right">2,454,430</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7.21</td> <td> </td> <td> </td> <td> </td> <td align="right">4.35</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">194</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Vested and unvested expected to vest at June 30, 2011 </div></td> <td> </td> <td> </td> <td align="right">2,418,159</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">7.24</td> <td> </td> <td> </td> <td> </td> <td align="right">4.32</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">192</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Exercisable at June 30, 2011 </div></td> <td> </td> <td> </td> <td align="right">1,500,657</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">8.48</td> <td> </td> <td> </td> <td> </td> <td align="right">3.47</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">103</td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The aggregate intrinsic values in the preceding table represent the total intrinsic values based on our closing stock price of $4.36 per share as of June 30, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><b><i>Unvested Restricted Stock</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Unvested restricted stock represents shares of common stock that are subject to the risk of forfeiture until the fulfillment of specified performance criteria. Our unvested restricted stock awards generally cliff vest on either the first, second or third anniversary date of the grant. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For grants which vest based on specified Company performance criteria, the grant date fair value of the shares is recognized over the period of performance once achievement of such criteria is deemed probable. For grants that vest through passage of time, the grant date fair value of the award is recognized ratably over the vesting period. The fair value of unvested restricted stock awards is determined based on the number of shares granted and the market value of our shares on the grant date. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents activity of all unvested restricted stock for the six month period ended June 30, 2011: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Grant Date</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Unvested at January 1, 2011 </div></td> <td> </td> <td> </td> <td align="right">784,063</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">4.77</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Granted </div></td> <td> </td> <td> </td> <td align="right">342,919</td> <td> </td> <td> </td> <td> </td> <td align="right">5.40</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Vested and exercised </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(144,225</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">5.22</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Forfeited and cancelled </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(178,207</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">4.58</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Unvested at June 30, 2011 </div></td> <td> </td> <td> </td> <td align="right">804,550</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5.00</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. Investments and Fair Value Measurements</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Financial Accounting Standards Board, or FASB, authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Financial assets and liabilities recorded on the accompanying unaudited condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 1</i>—Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives and most United States government and agency securities). </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 2</i>—Financial assets and liabilities whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following: </div> <div style="margin-top: 10pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently); </div></td> </tr> <tr> <td style="font-size: 8pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and </div></td> </tr> <tr> <td style="font-size: 8pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div style="text-align: justify">Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities such as options, warrants and derivatives). </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 3</i>—Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We currently do not have any Level 2 or Level 3 financial assets or liabilities. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"> <b><i>Assets and Liabilities Measured at Fair Value on a Recurring Basis</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following table sets forth by level within the fair value hierarchy our financial assets that are accounted for at fair value on a recurring basis at June 30, 2011 and December 31, 2010, according to the valuation techniques we used to determine their fair values (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements at Reporting Date Using:</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices in</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Active Markets for</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Significant Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Identical Assets</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Observable Inputs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Nonqualified deferred compensation plan investments </div></td> <td> </td> <td align="left">$</td> <td align="right">910</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">910</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Marketable securities </div></td> <td> </td> <td> </td> <td align="right">1,614</td> <td> </td> <td> </td> <td> </td> <td align="right">1,614</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Equity investment in French licensee </div></td> <td> </td> <td> </td> <td align="right">406</td> <td> </td> <td> </td> <td> </td> <td align="right">406</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">2,930</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,930</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements at Reporting Date Using:</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices in</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Active Markets for</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Significant Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Identical Assets</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Observable Inputs</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Description</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Nonqualified deferred compensation plan investments </div></td> <td> </td> <td align="left">$</td> <td align="right">1,251</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,251</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Marketable securities </div></td> <td> </td> <td> </td> <td align="right">1,365</td> <td> </td> <td> </td> <td> </td> <td align="right">1,365</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Equity investment in French licensee </div></td> <td> </td> <td> </td> <td align="right">314</td> <td> </td> <td> </td> <td> </td> <td align="right">314</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">2,930</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,930</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">—</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our investments associated with our Nonqualified Deferred Compensation Plan consist of mutual fund shares that are publicly traded and for which market prices are readily available. Gains and losses related to such investments are recorded in other income (expense) in the statement of operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, we held 366,500 common shares of Absolute Software Inc., or Absolute, a Vancouver British Columbia, Canada based computer theft company, as marketable securities that we have designated as trading securities. The gains and losses on these securities are recorded in other income (expense) in the statement of operations. These shares are publicly traded and their market price is readily available. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our investment in common stock of our French licensee consists of publicly traded shares with a market price that is readily available. During the six months ended June 30, 2011, we recorded an unrealized gain related to this investment in accumulated other comprehensive income. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><b><i>Assets and Liabilities Measured at Fair Value on a Non-recurring Basis</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Certain assets are measured at fair value on a non-recurring basis. Assets that are not measured at fair value on a recurring basis are subject to fair value adjustments only in certain circumstances. Our assets in this category include cost and equity method investments, which are written down to fair value when their declines are determined to be other-than-temporary, and long-lived assets, or goodwill, that are written down to fair value when they are held for sale or determined to be impaired. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We use Level 3 inputs to measure the fair value of goodwill and intangible assets on their annual measurement dates or, if a triggering event occurs, on an interim basis. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, our investments in international licensees included a 12.5% equity interest in our Mexican licensee, totaling $1,541,000, and a 17.5% equity interest in our Benelux licensee, totaling $496,000. Our investments in the aforementioned licensees are carried at cost and adjusted only for other-than-temporary declines in fair value, distributions of capital and additional investments made. Management periodically reviews the carrying value of these investments using Level 3 inputs such as projections of anticipated cash flows, market conditions, legal factors, operational performance, and valuations, when appropriate. We have concluded that there are no impairments to the fair value of these investments for all periods presented. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><b><i>Financial Instruments not Measured at Fair Value</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Some of our financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At June 30, 2011, the carrying value of $9,850,000 of our long-term debt approximated the fair value because our two year multicurrency revolving credit agreement, which was established on December 29, 2009 and amended on June 30, 2010 and December 29, 2010, carries a variable rate of interest which is adjusted periodically and reflects current market conditions. Also see Note 6 below. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. Debt</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011 and December 31, 2010, our debt consisted of the following (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Short-term debt: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">SCI convertible promissory note </div></td> <td> </td> <td align="left">$</td> <td align="right">146</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">146</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Long-term debt: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Term loan </div></td> <td> </td> <td> </td> <td align="right">9,850</td> <td> </td> <td> </td> <td> </td> <td align="right">8,798</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">$</td> <td align="right">9,996</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">8,944</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On August 10, 2010, SCI issued a one year, 11% interest Convertible Promissory Note totaling $400,000 to its shareholders. As a 64% holder of SCI, a $254,000 note was issued to LoJack Corporation and is eliminated in consolidation. The remaining $146,000 due to the noncontrolling holders of SCI is classified as short-term debt on our consolidated balance sheet. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On December 29, 2009, we entered into a two year multicurrency revolving credit agreement, or the Credit Agreement, with RBS Citizens, N.A., as Lender, Administrative Agent and Lead Arranger, and TD Bank, N.A., as a Lender and Issuing Bank. The Credit Agreement provides for a multicurrency revolving credit facility in the maximum amount of USD $30,000,000, subject to a borrowing base calculation (or its equivalent in alternate currencies). The maturity date for the revolving credit loan is January 10, 2014. We have the right to increase the aggregate amount available to be borrowed under the Credit Agreement to USD $50,000,000, subject to certain conditions, including consent of the lenders. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, we had a total of CAD $9,500,000 (USD $9,850,000) outstanding borrowings under the Credit Agreement. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin. The interest rate in effect as of June 30, 2011 was 3.8%. As of June 30, 2011, we also had three outstanding irrevocable letters of credit in the aggregate amount of $1,316,000. These letters of credit reduce our outstanding borrowing availability under the Credit Agreement. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Credit Agreement contains limitations on capital expenditures, repurchases of common stock, certain investments, acquisitions and/or mergers and prohibits disposition of assets other than in the normal course of business. Additionally, we are required to maintain certain financial performance measures including maximum leverage ratio, minimum cash flow coverage ratio, minimum quick ratio and maximum capital expenditures. The payment of dividends is permitted but is limited only to the extent such payments do not affect our ability to meet certain financial performance measures. Failure to maintain compliance with covenants could impair the availability of the loans under the facility. At June 30, 2011, we had borrowing availability of $18,834,000. At June 30, 2011, we were in compliance with all of the financial covenants in the Credit Agreement. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Credit Agreement terminates on January 10, 2014, at which point all amounts outstanding under the revolving credit facility are due. The Credit Agreement is guaranteed by our United States domestic subsidiaries and certain Canadian subsidiaries and is secured by all domestic assets, including our intellectual property and a pledge of 100% of the stock of Boomerang Tracking Inc., or Boomerang, and 65% of the capital stock of LoJack Equipment Ireland, or LoJack Ireland. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. Comprehensive Income (Loss)</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Total comprehensive income (loss) and its components for the three and six months ended June 30, 2011 and 2010 were as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net income (loss) </div></td> <td> </td> <td align="left">$</td> <td align="right">200</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(18,403</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(1,432</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(24,063</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss), net of tax: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(189</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">679</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,157</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(188</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Unrealized gains (losses) on marketable securities </div></td> <td> </td> <td> </td> <td align="right">22</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(262</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">93</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(466</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total comprehensive income (loss) </div></td> <td> </td> <td> </td> <td align="right">33</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(17,986</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2,496</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(24,717</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less: Comprehensive loss attributable to noncontrolling interest </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(21</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(204</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(47</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(286</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Comprehensive income (loss) attributable to LoJack Corporation </div></td> <td> </td> <td align="left">$</td> <td align="right">54</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(17,782</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(2,449</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(24,431</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Total accumulated other comprehensive income and its components were as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="58%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Foreign</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Currency</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Gain on</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Translation</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Marketable</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Comprehensive</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Adjustment</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Securities</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Income</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2010 </div></td> <td> </td> <td align="left">$</td> <td align="right">6,584</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">129</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">6,713</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,157</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,157</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Unrealized gain on marketable securities </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">93</td> <td> </td> <td> </td> <td> </td> <td align="right">93</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at June 30, 2011 </div></td> <td> </td> <td align="left">$</td> <td align="right">5,427</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">222</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5,649</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. Income Taxes</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recorded a worldwide provision for income taxes of $380,000 and $601,000 for the three and six months ended June 30, 2011, respectively. These amounts are primarily comprised of the provision for income taxes for our Irish and Brazilian subsidiaries. The effective income tax rates for the three and six months ended June 30, 2011 were higher than our federal statutory rate, in large part because no U.S. income tax benefit was recorded for the current year domestic net operating loss due to the valuation allowance maintained against our net U.S. deferred tax asset and also due to the impact of unbenefited foreign losses. Unbenefited foreign losses are pre-tax losses in foreign jurisdictions for which we record no tax benefit. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have net U.S. deferred tax assets that have arisen as a result of temporary differences between book and tax accounting, primarily related to deferred revenue and stock compensation. The FASB authoritative guidance on accounting for income taxes requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Our ability to realize a deferred tax asset is based on our ability to generate sufficient future taxable income. The valuation allowance was determined in accordance with the guidance, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against the net deferred tax assets. We maintain a full valuation allowance against our net U.S. deferred tax assets and did not recognize any deferred tax benefits related to U.S. net losses incurred during the three and six months ended June 30, 2011. We will maintain a full valuation allowance on our net U.S. deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. Segment Reporting</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have three separately managed and reported business segments: North America, International and All Other. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our North America segment includes our domestic operations, which sells products that operate in all or a portion of 28 states and the District of Columbia in the United States, and Boomerang, a provider of stolen vehicle recovery products and services in Canada. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our International segment includes our international operations, which sells products and licenses or owns and operates LoJack proprietary vehicle recovery technology in 32 countries and territories located in South America, Mexico, the Caribbean, Africa, Asia and Europe, including Italy where we operate through our wholly-owned subsidiary, LoJack Italia, SRL, or LoJack Italia. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">All Other includes the results of LoJack SafetyNet and SCI. LoJack SafetyNet and SCI provide technology for the tracking and rescue of people at risk, and recovery of valuable cargo and business information, respectively. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents information about our operating segments for the three and six months ended June 30, 2011 and 2010 (in thousands). Certain general overhead costs have been allocated to the North America and International segments based on methods considered to be reasonable by our management. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>North America</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>International</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Segment</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Segment</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>All Other</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Consolidated Statements of Operations Data</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Three Months Ended June 30, 2011</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">23,733</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">9,084</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">704</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">33,521</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td> </td> <td align="right">1,596</td> <td> </td> <td> </td> <td> </td> <td align="right">106</td> <td> </td> <td> </td> <td> </td> <td align="right">71</td> <td> </td> <td> </td> <td> </td> <td align="right">1,773</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating (loss) income </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,407</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">1,915</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(457</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Three Months Ended June 30, 2010</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">25,842</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">10,270</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,239</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">37,351</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td> </td> <td align="right">1,938</td> <td> </td> <td> </td> <td> </td> <td align="right">110</td> <td> </td> <td> </td> <td> </td> <td align="right">127</td> <td> </td> <td> </td> <td> </td> <td align="right">2,175</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating (loss) income </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3,013</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,410</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(859</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,462</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Six Months Ended June 30, 2011</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">46,100</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">16,298</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,462</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">63,860</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td> </td> <td align="right">3,135</td> <td> </td> <td> </td> <td> </td> <td align="right">213</td> <td> </td> <td> </td> <td> </td> <td align="right">192</td> <td> </td> <td> </td> <td> </td> <td align="right">3,540</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating (loss) income </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4,541</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,858</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(908</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2,591</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><i>Six Months Ended June 30, 2010</i> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">48,895</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">17,142</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">2,102</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">68,139</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Depreciation and amortization </div></td> <td> </td> <td> </td> <td align="right">3,592</td> <td> </td> <td> </td> <td> </td> <td align="right">208</td> <td> </td> <td> </td> <td> </td> <td align="right">255</td> <td> </td> <td> </td> <td> </td> <td align="right">4,055</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating (loss) income </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(8,129</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2,201</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,447</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(7,375</td> <td nowrap="nowrap">)</td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. Commitments and Contingent Liabilities</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, we were subject to the various legal proceedings and claims discussed below, as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The results of legal proceedings cannot be predicted with certainty. Should we fail to prevail in any of these legal matters, our financial condition and results of operations could be materially adversely affected. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><b>California Class Action Litigations</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Employee Claims</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April 2006, Mike Rutti vs. LoJack Corporation, Inc. was filed in the United States District Court for the Central District of California by an employee alleging violations of the Fair Labor Standards Act, the California Labor Code and the California Business & Professions Code, and seeking class action status (the “Federal Court Case”). In September 2007, our motion for summary judgment was granted and the district court dismissed all of the plaintiff’s federal law claims. The plaintiff appealed the dismissal to the Ninth Circuit Court of Appeals and in August 2009, the Ninth Circuit affirmed the district court’s grant of summary judgment on all claims except as to the claim for compensation for the required postliminary data transmission, or the data transmission claim, for which the dismissal was vacated. The plaintiff filed a petition for rehearing to the Ninth Circuit and on March 2, 2010, the Ninth Circuit affirmed the district court’s grant of summary judgment on all claims except as to (a) the claim for compensation for commuting under state law and (b) the data transmission claim, which are the two remaining claims. The plaintiff seeks to pursue the claim for compensation for commuting time in the State Court Case referenced below. The plaintiff moved for conditional class certification for the data transmission claim and on January 14, 2011, the District Court for the Central District of California granted the plaintiff’s motion for conditional certification. The trial for this claim in federal court has been set to begin in November 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Due to the dismissal of the plaintiff’s claims in federal court in September 2007 as discussed above, in November 2007, the plaintiff also filed Mike Rutti, Gerson Anaya vs. LoJack Corporation, Inc. comprising its state law claims in California State Court (the “State Court Case”). In June 2009, the California State Court granted class certification with respect to nine claims and denied class certification with respect to five claims. The Company appealed this decision and on March 26, 2010, the California State Appellate Court granted our appeal in part, denying certification with respect to certain claims and affirming certification with respect to certain other claims. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On February 14, 2011, the Company filed a Notice of Removal to remove this State Court Case to Federal Court, thereby seeking to consolidate both the Federal and State Court Cases to be heard in Federal Court and the plaintiff filed a motion to remand the Federal Court Case to State Court. On April 15, 2011, the United States District Court for the Central District of California granted the plaintiff’s motion to remand the State Court Case to the California State Court. On April 29, 2011, the Company filed a petition for leave to appeal the decision to remand, which the Ninth Circuit subsequently declined to hear. Thus, these claims will be heard in State Court. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On July 29, 2011, the California State Court held a class certification hearing regarding the remaining uncertified claims and held that all such claims, except for vehicle maintenance expense reimbursement claims, were to be certified. Thus, there are currently 16 claims class certified, including morning and evening commute time, meal breaks, rest breaks, on-call time, postliminary data transmission time, time picking up supplies from UPS along with associated travel time, time spent washing and maintaining the company vehicle, time spent washing and maintaining work uniforms, time charting the route to the first job of the day, time spent driving to and from work meetings and waiting for work meetings to start, reimbursement of work tools expenses, reimbursement of the cost of washing the company vehicle, failure to pay overtime, waiting time penalties, penalties under the California Private Attorney General Act, and claims under California Business and Professions Code § 17200. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In both the Federal and State Court Cases, the plaintiff, on behalf of the class, seeks unpaid wages, penalties, interest and attorneys’ fees. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company believes that it has substantial legal and factual defenses to these claims and intends to defend its interests vigorously. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have recorded an accrual in the amount of $750,000, with respect to certain of the above claims in the State Court Case based on our best estimates, where a potential loss is considered probable. We have estimated our range of possible loss with respect to the State Court Case to be between $750,000 and $30,000,000. We have estimated our range of possible loss with respect to the data transmission claim in the Federal Court Case to be between $0 and $1,000,000. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><i>Consumer Claims</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On June 15, 2010, a suit entitled Louis Morin v. LoJack Corp., Inc., et al was filed in the Los Angeles County Superior Court of the State of California (Central District) alleging, amongst other claims, violations of the California Consumers Legal Remedies Act, the California Business and Professions Code § 17200 (unfair competition) and § 17500 (false advertising), and breach of implied warranty with respect to LoJack Early Warning for motorcycles, and seeking class action status. On July 29, 2010, the Company removed the case to the United States District Court for the Central District Court of California. On August 23, 2010, the Company filed a motion to dismiss all claims, which was granted by the Court on September 27, 2010, without prejudice. The dismissal without prejudice provided the plaintiff with the opportunity to amend its complaint, and on October 25, 2010, the plaintiff filed an amended complaint, for alleged fraud, violations of the California Consumers Legal Remedies Act, the California Business and Professions Code § 17200 (unfair competition) and § 17500 (false advertising), and breach of implied warranty and again sought class certification. On November 12, 2010, the Company filed a motion to dismiss all claims and a motion to strike certain claims. On December 28, 2010, the Court denied the Company’s motion to dismiss. The plaintiff, on behalf of the class, sought injunctive relief, restitution, disgorgement, punitive damages, and attorneys’ fees in unspecified amounts. On March 3, 2011, the plaintiff filed a motion for class certification and the Company filed its opposition to class certification on March 28, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The parties participated in a mediation hearing on March 29, 2011 and reached a settlement to resolve all claims on a class-wide basis. The United States District Court for the Central District of California preliminarily approved the settlement on June 16, 2011. Pursuant to the terms of the settlement, the Company would revise its disclosures in motorcycle related marketing materials and provide class members with a twelve month extension of the terms of the Company’s Limited Recovery Warranty. The Company would also pay an enhancement award of $20,000 to the named plaintiff and would pay the plaintiffs’ attorneys’ fees and costs up to $415,000. Under the terms of the settlement, the Company would receive a release by all potential class members who do not affirmatively opt out of the settlement. Nothing in the settlement agreement constitutes an admission of any wrongdoing, liability or violation of law by the Company. Rather, the Company has signed the settlement agreement to resolve the litigation, thereby eliminating the uncertainties and expense of further protracted litigation. A fairness hearing for final approval of the settlement is scheduled for December 5, 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have recorded an accrual in the amount of $570,000, with respect to the terms of the settlement, including a $135,000 accrual relating to the twelve month warranty extension, which did not have a material impact on our consolidated financial position or results of operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><b>New York Litigation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On October 13, 2010, a suit was filed by G.L.M. Security & Sound, Inc. against LoJack Corporation in United States District Court for the Eastern District of New York alleging breach of contract, misrepresentation, violation of the New York franchise law, and price discrimination. The plaintiff seeks damages of $10,000,000, punitive damages, interest and attorneys fees, and treble damages. On December 14, 2010, the Company filed a motion to dismiss all claims. On February 1, 2011, the plaintiff filed a motion to amend the complaint and sought to add a claim for breach of fiduciary duty. On February 15, 2011, the Company filed its opposition to the motion to amend and sought the dismissal of all claims. The parties are currently awaiting the Court’s decision. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company believes that it has substantial legal and factual defenses to these claims and intends to defend its interests vigorously. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Given the early stages of this matter, we cannot predict the outcome of the case nor estimate the possible loss or range of loss, if any, we could incur if there was an unfavorable outcome with respect to this litigation. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><b>Brazilian Licensee Litigation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On March 21, 2011, the Company received a demand for arbitration with the American Arbitration Association. The demand was filed by Global Tracking Tech., Ltd. and Tracker do Brasil LTDA, which license the LoJack technology in Brazil. The demand alleges that the Company failed to maintain a patent for the stolen vehicle recovery system in Brazil and includes claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of Mass. Gen Laws c. 93A. The claimant seeks $111,500,000 in damages, treble damages, and attorneys’ fees and costs. On May 11, 2011, the American Arbitration Association administratively closed this matter. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Also on March 21, 2011, the Company received a separate demand for arbitration with the American Arbitration Association, filed by the same licensee, alleging breach of contract, breach of the implied covenant of good faith and fair dealing and violation of Mass. Gen Laws c. 93A relating to product pricing and the fulfillment of purchase orders to the licensee. The claimant seeks, amongst other things, $289,500,000 in actual damages, treble damages, attorneys fees, declaratory and injunctive relief. On July 6, 2011, claimants voluntarily withdrew their application for arbitration and Tracker do Brasil LTDA commenced the below discussed lawsuit against LoJack Equipment Ireland, Ltd. (“LoJack Ireland”) requesting that a Massachusetts Court order LoJack Ireland to submit to arbitration before the American Arbitration Association’s International Centre for Dispute Resolution, without limitation or precondition. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On July 7, 2011, LoJack Ireland was served by Tracker do Brasil LTDA with the aforementioned lawsuit which was filed in Norfolk Superior Court in Massachusetts. The lawsuit alleges interference with contractual relations, fraud/intentional misrepresentation, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing and violation of Mass. Gen Laws c. 93A relating to product pricing and the fulfillment of purchase orders for the licensee. The claimant seeks, amongst other things, $289,500,000 in actual damages, treble damages, attorneys’ fees, and declaratory and injunctive relief. The claimant also seeks a court order compelling arbitration and staying the case in Norfolk Superior Court during the pendency of the arbitration. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company believes that it has substantial legal and factual defenses to these claims and intends to defend its interests vigorously. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Given the current stage of this matter, we cannot predict the outcome of the case nor estimate the possible loss or range of loss, if any, we could incur if there was an unfavorable outcome with respect to this litigation. </div> </div>