UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
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State or Other Jurisdiction of Incorporation or Organization |
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I.R.S. Employer Identification No. |
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Address of Principal Executive Offices |
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Zip Code |
Registrant’s Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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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
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨ |
Accelerated filer ¨ |
| Non-accelerated filer | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at November 16, 2022 |
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Common Stock, $0.01 par value per share |
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AUTOSCOPE TECHNOLOGIES CORPORATION
TABLE OF CONTENTS
| 3 |
Autoscope Technologies Corporation
(in thousands, except share information)
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September 30, 2022 |
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December 31, |
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(Unaudited) |
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2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories |
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| Investments in available-for-sale debt securities | |||||||
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment: |
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Furniture and fixtures |
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Leasehold improvements |
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Equipment |
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| Real property | |||||||
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Accumulated depreciation |
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Operating lease assets, net |
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Intangible assets, net |
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Deferred income taxes |
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| Long-term investments in available-for-sale debt securities | |||||||
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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| Deferred revenue | |||||||
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Warranty |
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Accrued compensation |
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| Operating lease obligations |
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| Current maturities of long-term debt | |||||||
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Other current liabilities |
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Total current liabilities |
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| Commitments and contingencies | |||||||
| Long-term debt | |||||||
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TOTAL LIABILITIES |
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Shareholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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issued and outstanding at September 30, 2022 and December 31, 2021, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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Total shareholders' equity |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
| 4 |
Autoscope Technologies Corporation
(Unaudited)
(in thousands, except per share data)
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Three-Month |
Nine-Month Periods Ended September 30, |
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| 2022 | 2021 | 2022 | 2021 | ||||||||||||
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Revenue: |
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Product sales |
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Royalties |
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Cost of revenue: |
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Product sales |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Income from operations |
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| Other income | |||||||||||||||
| Investment income (loss) | ( |
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| Interest expense | ( |
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| Income from operations before income taxes | |||||||||||||||
| Income tax expense | |||||||||||||||
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Net income |
$ | $ | $ | $ | |||||||||||
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Net income per share: |
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Basic |
$ | $ | $ | $ | |||||||||||
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Diluted |
$ | $ | $ | $ | |||||||||||
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Weighted average number of common shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to the condensed consolidated financial statements. |
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Autoscope Technologies Corporation
(Unaudited)
(in thousands)
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Three-Month Periods Ended September 30, |
Nine-Month Periods Ended September 30, |
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| 2022 | 2021 | 2022 | 2021 | ||||||||||||
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Net income |
$ | $ | $ | $ | |||||||||||
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Other comprehensive income: |
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| Unrealized loss on available for sale debt securities, net of tax | ( |
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Foreign currency translation adjustment |
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Comprehensive income |
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| See accompanying notes to the condensed consolidated financial statements. | |||||||||||||||
| 6 |
Autoscope Technologies Corporation
(Unaudited)
(in thousands)
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Nine-Month Periods Ended |
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2022 |
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2021 |
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Operating activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
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Depreciation |
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Software amortization |
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| Amortization of debt issuance costs | |||||||
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Stock-based compensation |
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| Deferred income tax expense | |||||||
| Forgiveness income from PPP Loan (Note N) | ( |
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| Loss on disposal of assets | |||||||
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Realized loss on AFS investments |
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| Realized loss on equity investments | |||||||
| Unrealized loss on equity investments | |||||||
| Noncash investment income | ( |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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( |
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Inventories |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Net cash provided by for operating activities |
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Investing activities: |
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Capitalized software development costs |
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Purchases of property and equipment |
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| Purchases of equity securities | ( |
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| Sale of equity securities | |||||||
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Sale of debt securities |
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Net cash used for investing activities |
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Financing activities: |
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Stock for tax withholding |
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| Dividends paid | ( |
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| Proceeds from exercised options | |||||||
| Proceeds from PPP loan | |||||||
| Principal payments on long-term debt | ( |
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Net cash used for financing activities |
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Effect of exchange rate changes on cash |
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Change in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ |
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$ |
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| Non-Cash investing and financing activities: |
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| Cash paid for interest | $ | $ | |||||
See accompanying notes to the condensed consolidated financial statements.
| 7 |
AUTOSCOPE TECHNOLOGIES CORPORATION
(in thousands, except share data)
| Three-Month Period Ended September 30, 2021 |
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Shares Issued |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total | |||||||||||||||||
| Balance, June 30, 2021 (unaudited) |
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$ | $ | $ | ( |
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| Stock-based compensation | — | — | — | |||||||||||||||||||
| Dividends declared | — | — | — | — | ( |
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| Comprehensive income: | ||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( |
) | — | ( |
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| Net income | — | — | — | — | ||||||||||||||||||
| Balance, September 30, 2021 (unaudited) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||
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Three-Month Period Ended September 30, 2022 |
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Shares Issued |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total |
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| Balance, June 30, 2022 (unaudited) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||
| Dividends declared |
— | — | — | — | ( |
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| Comprehensive income: | ||||||||||||||||||||||
| Unrealized loss on available for sale debt securities, net of tax |
— |
— | — | ( |
) | — | ( |
) | ||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( |
) | — | ( |
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| Net income | — | — | — | — | ||||||||||||||||||
| Balance, September 30, 2022 (unaudited) |
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$ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
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See accompanying notes to the condensed consolidated financial statements |
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| Nine-Month Period Ended September 30, 2021 |
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Shares Issued |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total | |||||||||||||||||
| Balance, December 31, 2020 |
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$ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||
| Stock options exercised | — | — | — | |||||||||||||||||||
| Stock for tax withholding |
( |
) | — |
( |
) | — | — | ( |
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| Dividends declared |
— | — | — | — | ( |
) | ( |
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| Comprehensive income: | ||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( |
) | — | ( |
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| Net income | — | — | — | — | ||||||||||||||||||
| Balance, September 30, 2021 (unaudited) | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||
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Nine-Month Period Ended September 30, 2022 |
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Shares Issued |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total |
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| Balance, December 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||
| Stock options exercised |
— | — | — | |||||||||||||||||||
| Stock for tax withholding | ( |
) | — | ( |
) | — | — | ( |
) | |||||||||||||
| Dividends declared |
— | — | — | — |
( |
) | ( |
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| Transfers of investments from held-to-maturity to available-for-sale classification | — | — | — | ( |
) | — | ( |
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| Comprehensive income: | ||||||||||||||||||||||
| Unrealized loss on available for sale debt securities, net of tax | — | — | — | ( |
) | — | ( |
) | ||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( |
) | — | ( |
) | ||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||
| Balance, September 30, 2022 (unaudited) |
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$ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
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See accompanying notes to the condensed consolidated financial statements |
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| 9 |
AUTOSCOPE TECHNOLOGIES CORPORATION
(Unaudited)
September 30, 2022
Note A: Basis of Presentation
On July 21, 2021, a holding company reorganization was completed (the "Reorganization") in which Image Sensing Systems, Inc. ("ISNS") became a wholly-owned subsidiary of the new parent company named "Autoscope Technologies Corporation" ("Autoscope"), which became the successor issuer to ISNS. As a result of the Reorganization, Autoscope replaced ISNS as the public company trading on the Nasdaq Stock Market under the ticker symbol "AATC," and outstanding shares of ISNS's common stock automatically converted into shares of common stock of Autoscope. As used in this Quarterly Report on Form 10-Q, the "Company", "we", "us" and "our" or its management or business at any time before the effective date of the Reorganization refer to those of ISNS as the predecessor company and its wholly-owned subsidiaries and thereafter to Autoscope and its wholly-owned subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. The Reorganization is intended to be a tax-free transaction for U.S. federal income tax purposes for the Company's shareholders. Autoscope was incorporated on April 23, 2021 under the laws of the State of Minnesota, and ISNS was incorporated in Minnesota on December 20, 1984. The Company develops and markets video and radar processing products for use in applications such as intersection control, highway, bridge and tunnel traffic management and traffic data collection. We sell our products primarily to distributors and also receive royalties under a license agreement with a manufacturer/distributor for certain of our products. Our products are used primarily by governmental entities.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q, which require the Company to make estimates and assumptions that affect amounts reported. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. It is the opinion of management that the unaudited condensed consolidated financial statements include all adjustments consisting of normal recurring accruals considered necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated.
Operating results for the three and nine-month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC.
Cash Dividend
On February 2, 2022, the Board of Directors of the Company approved a cash dividend of $
On May 10, 2022, the Board of Directors of the Company approved a cash dividend of $
On August 9, 2022, the Board of Directors of the Company approved a cash dividend of $
On November 8, 2022, the Board of Directors of the Company approved a cash dividend of $
Summary of Significant Accounting Policies
The Company believes that of its significant accounting policies, the following are particularly important to the portrayal of the Company's results of operations and financial position and may require the application of a higher level of judgment by the Company's management and, as a result, are subject to an inherent degree of uncertainty.
Revenue Recognition
We recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
| 10 |
| We determine revenue recognition through the following steps: | |
| ● | Identification of a contract, or contracts, with a customer; |
| ● | Identification of performance obligations in the contract or contracts; |
| ● |
Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, we satisfy a performance obligation. |
Revenue disaggregated by revenue source for the three and nine months ended September 30, 2022 and 2021 consists of the following (in thousands); revenue excludes sales and usage-based taxes when or if it has been determined that we are acting as a pass-through agent:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 |
2022 | 2021 | |||||||||
| Product sales | $ | $ | $ | $ | ||||||||
| Royalties | ||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||
Product Sales:
Product revenue is generated primarily from the direct sales of our RTMS radar systems worldwide and our Autoscope video systems in Europe and Asia. Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the amount we expect to receive in exchange for those goods or services.
Certain product sales may contain multiple performance obligations for revenue recognition purposes. Multiple performance obligations may include hardware, software, installation services, training, support, and extended warranties. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the observable stand-alone prices charged to customers. For performance obligations without observable stand-alone prices charged to customers, we evaluate the adjusted market assessment approach, the expected cost-plus margin approach, and stand-alone sales to estimate the stand-alone selling prices.
Revenue for services such as maintenance, repair, and technical support is recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts. From time to time, our payment terms may vary by the type and location of our customer and the products or services offered. Revenue for extended warranties are deferred until the coverage period and then recognized ratably over the extended warranty term.
We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. The term between invoicing and when payment is due is less than one year. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.
We record provisions against sales revenue for estimated returns and allowances in the period when the related revenue is recorded based on historical sales returns and changes in end user demand.
Royalties:
Econolite Control Products, Inc. (“Econolite”) is our licensee that sells our Autoscope video system products in the United States, Mexico, Canada and the Caribbean. The royalty of approximately
Practical Expedients and Exemptions:
We generally expense sales commissions when incurred because the amortization periods would have been
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of
| 11 |
Inventories
Inventories are primarily electronic components and finished goods and are valued at the lower of cost or net realizable value determined under the first-in, first-out accounting method.
Income Taxes
We record a tax provision for the anticipated tax consequences of our reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. We believe it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of our deferred tax assets. If all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results. We recognize penalties and interest expense related to unrecognized tax benefits in income tax expense.
Intangible Assets
We capitalize certain software development costs related to software to be sold, leased, or otherwise marketed. Capitalized software development costs include purchased materials, services, internal labor and other costs associated with the development of new products and services. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. Based on our product development process, technological feasibility is generally established once product and detailed program designs have been completed, uncertainties related to high-risk development issues have been resolved through coding and testing, and we have established that the necessary skills, hardware, and software technology are available for production of the product. Once a software product is available for general release to the public, capitalized development costs associated with that product will begin to be amortized to cost of sales over the product's estimated economic selling life, using the greater of straight-line or a method that results in cost recognition in future periods that is consistent with the anticipated timing of product revenue recognition.
Capitalized software development costs are subject to an ongoing assessment of recoverability, which is impacted by estimates and assumptions of future revenues and expenses for these software products, as well as other factors such as changes in product technologies. Any portion of unamortized capitalized software development costs that are determined to be in excess of net realizable value have been expensed in the period in which such a determination is made. Subsequent to reaching technological feasibility for certain software products, we did not capitalize any software development cost in the quarters ended September 30, 2022 and 2021, and we capitalized $
Intangible assets with finite lives are amortized on a straight-line basis over the expected period to be benefited by future cash flows and reviewed for impairment. At both September 30, 2022 and 2021, we determined there was
Investments in Debt Securities
We classify investments in debt securities on the acquisition date and at each balance sheet date. At March 31, 2022, all of our investments in debt securities were classified as held-to-maturity. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold until maturity. Securities classified as held-to-maturity are carried at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security using the straight-line method.
During the quarter ended June 30, 2022, we changed the classification of $
Investments in Equity Securities
We carry all investments in equity securities at fair value and record the subsequent changes in values in the Consolidated Statement of Operations as a component of investment income or loss.
| 12 |
Note B: Recent Accounting Pronouncements
Accounting pronouncements net yet adopted
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")." The amendments adopted in ASU 2016-13, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU Nos 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the SEC and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company is currently evaluating the potential impact of ASU 2016‑13 on its consolidated financial statements.
The adoption of ASU 2016-13 could result in an increase in the allowance for bad debt on the Company's account receivables as a result of changing from an "incurred loss" model, which encompasses allowances for current known losses, to an "expected loss" model, which encompasses allowances for losses expected to be incurred on the Company's receivables. While we are currently evaluating the potential impact of adopting ASU 2016-13, we expect the impact of adoption to be immaterial.
Note C: Fair Value Measurements
The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for measuring fair value and outlines the required disclosures regarding fair value measurements. Fair value is 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 at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs as follows:
| Level 1: |
observable inputs such as quoted prices in active markets; |
|
| Level 2: |
inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
|
| Level 3: |
unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Financial Instruments not Measured at Fair Value
Certain of our financial instruments are not measured at fair value and are recorded at carrying amounts approximating fair value, based on their short-term nature or variable interest rate. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and other current financial assets and liabilities.
| 13 |
Note D: Investments in available-for-sale debt securities
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value(1) | |||||||||||||
|
U.S. government |
$ | $ | $ | ( |
) | $ | ||||||||||
| Corporate and other taxable bonds | ( |
) | ||||||||||||||
| Other | ( |
) | ||||||||||||||
| $ | $ | $ | ( |
) | $ | |||||||||||
| Due in one year or less | Due after one year through five years | Mortgage-backed securities | Total | |||||||||||||
|
Amortized cost |
$ | $ | $ | $ | ||||||||||||
| Fair value(1) | $ | $ | $ | $ | ||||||||||||
| Less than 12 months | 12 months or more |
Total |
||||||||||||||||||||||
| Fair value(1) | Gross unrealized losses | Fair value(1) | Gross unrealized losses | Fair value(1) | Gross unrealized losses | |||||||||||||||||||
| U.S. government | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | ||||||||||||||
| Corporate and other taxable bonds | ( |
) | ( |
) | ||||||||||||||||||||
| Other | ( |
) | ( |
) | ||||||||||||||||||||
| $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | |||||||||||||||
We did not consider any of our available-for-sale securities to be impaired as of September 30, 2022. When evaluating for impairment we assess indicators that include but are not limited to, financial performance, changes in underlying credit ratings, market conditions and offers to purchase or sell.
| (1) |
| 14 |
Note E: Investments in equity securities
| Cost Basis | Net Unrealized Gains (Losses) | Fair Value(2) | ||||||||||
| Banks and finance | $ | $ | ( |
) | $ | |||||||
| $ | $ | ( |
) | $ | ||||||||
| (2) |
Note F: Inventories
Inventories consisted of the following (in thousands):
| September 30, 2022 | December 31, 2021 | ||||
|
Finished goods |
$ | $ | |
||
| Components | |||||
|
Total |
$ | $ | |||
| 15 |
Note G: Intangible Assets
Intangible assets consisted of the following (dollars in thousands):
|
|
September 30, 2022 |
|||||||||||||
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Weighted |
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Gross |
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Net |
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Average |
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Carrying |
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Accumulated |
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Carrying |
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Useful Life |
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Amount |
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Amortization |
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Value |
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(in Years) |
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||||||
|
Wrong Way development costs |
$ |
|
|
|
$ |
( |
) |
|
$ |
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|
|
— |
|
|
Vision development costs |
|
|
|
|
|
( |
) |
|
|
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|
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|
|
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Echo development costs |
|
|
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|
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( |
) |
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IntellitraffiQ development costs |
|
|
|
( |
) |
|
|
— |
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|||||
| IntelliSight development costs | ( |
) | ||||||||||||
|
Total |
$ |
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|
|
$ |
( |
) |
|
$ |
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|
|
December 31, 2021 |
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Weighted |
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Gross |
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Net |
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Average |
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||||
|
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Carrying |
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Accumulated |
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Carrying |
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Useful Life |
|
||||||
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Amount |
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Amortization |
|
Value |
|
(in Years) |
|
||||||
|
Wrong Way development costs |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
— |
|
|
Vision development costs |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Echo development costs |
|
|
|
( |
) |
|
|
|
|
|
||||
| IntellitraffiQ development costs | ( |
) | ||||||||||||
| IntelliSight development costs |
— | |||||||||||||
|
Total |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
Note H: Warranties
We generally provide a to
Warranty liability and related activity consisted of the following (in thousands):
|
|
Nine-Month Periods Ended |
||||||
|
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2022 |
|
2021 |
||||
|
|
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Beginning balance |
$ |
|
|
|
$ |
|
|
|
Warranty provisions |
|
|
|
|
|
|
|
|
Warranty claims |
|
( |
) |
|
|
( |
) |
|
Adjustments to preexisting warranties |
|
|
|
|
( |
) | |
|
Currency |
|
( |
) |
|
|
( |
) |
|
Ending balance |
$ |
|
|
|
$ |
|
|
| 16 |
Note I: Stock-Based Compensation
We compensate officers, directors, key employees and consultants with stock-based compensation under the Image Sensing Systems, Inc. 2014 Stock Option and Incentive Plan (the "2014 Plan"), which was approved by our shareholders and is administered under the supervision of our Board of Directors. The 2014 Plan and awards granted under the 2014 Plan were assumed by Autoscope in the Reorganization. Stock option awards are granted at exercise prices equal to the closing price of our stock on the day before the date of grant. Generally, options vest ratably over periods of to
Compensation expense, net of estimated forfeitures, is recognized ratably over the vesting period. Stock-based compensation expense included in general and administrative expense for the three-month periods ended September 30, 2022 and 2021 was $
Stock Options
A summary of the stock option activity for the first nine months of 2022 is as follows:
|
Number of Shares |
Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term (in years) |
Aggregate Intrinsic Value |
|||||||||||||
| Options outstanding at December 31, 2021 |
$ | $ | ||||||||||||||
| Granted |
$ | — | $ | |||||||||||||
| Exercised |
( |
) | $ | — | $ | |||||||||||
| Expired |
$ | — | $ | |||||||||||||
| Forfeited |
( |
) | $ | — | $ | |||||||||||
| Options outstanding at September 30, 2022 | $ | $ | ||||||||||||||
| Options exercisable at September 30, 2022 | $ | $ | ||||||||||||||
Stock options to purchase
The fair value of stock options granted under stock-based compensation programs has been estimated as of the date of each grant using the multiple option form of the Black-Scholes valuation model, based on the grant price and assumptions regarding the expected life, stock price volatility, dividends, and risk-free interest rates. Each vesting period of an option is valued separately, with this value being recognized over the vesting period. The weighted average per share grant date fair value of options to purchase
| 2022 | |||
| Expected life (in years) | |||
| Risk-free interest rate | % | ||
| Expected volatility | % | ||
| Dividend yield | % | ||
| 17 |
The expected life represents the period that the stock option awards are expected to be outstanding and was determined based on historical and anticipated future exercise and expiration patterns. The risk-free interest rate used is based on the yield of constant maturity U.S. Treasury bonds on the grant date with a remaining term equal to the expected life of the grant. We estimate stock volatility based on a historical daily price observation. The dividend yield assumption is based on the annualized current dividend divided by the share price on the grant date.
Restricted Stock Awards and Stock Awards
Restricted stock awards are granted under the 2014 Plan at the discretion of the Compensation Committee of our Board of Directors. We issue restricted stock awards to executive officers and key consultants. These awards may contain certain performance conditions or time-based vesting criteria.
We also issue stock awards as a portion of the annual retainer for each director on a quarterly basis. The stock awards are fully vested at the time of issuance.
The following table summarizes restricted stock award activity for the first nine months of 2022:
|
|
Number of |
|
|
Weighted |
|||
|
Awards outstanding December 31, 2021 |
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
Awards outstanding at September 30, 2022 |
|
|
|
|
$ |
|
|
As of September 30, 2022, the total stock-based compensation expense related to non-vested awards not yet recognized was $
Note J: Income per Common Share
Net income per share is computed by dividing net income (loss) by the daily weighted average number of common shares outstanding during the applicable periods. Diluted net income (loss) per share includes the potentially dilutive effect of common shares subject to outstanding stock options and restricted stock awards using the treasury stock method. Under the treasury stock method, shares subject to certain outstanding stock options and restricted stock awards have been excluded from the calculation of the diluted weighted average shares outstanding because the exercise of those options or the vesting of those restricted stock awards would lead to a net reduction in common shares outstanding. As a result, stock options and restricted stock awards to acquire
| 18 |
A reconciliation of net income per share is as follows (in thousands, except per share data):
|
Three-Month Periods Ended September 30, |
Nine-Month Periods Ended September 30, |
||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Numerator: |
|||||||||||||||
| Net income |
$ | $ | $ | $ | |||||||||||
| Denominator: |
|||||||||||||||
| Weighted average common shares outstanding |
|||||||||||||||
| Dilutive potential common shares |
|||||||||||||||
| Shares used in diluted net income per common share calculations |
|||||||||||||||
| Basic net income per common share |
$ | $ | $ | $ | |||||||||||
| Diluted net income per common share |
$ | $ | $ | $ | |||||||||||
Note K: Segment Information
The Company's Chief Executive Officer and management regularly review financial information for the Company's discrete operating segments. Based on similarities in the economic characteristics, nature of products and services, production processes, type or class of customer served, method of distribution and regulatory environments, the operating segments have been aggregated for financial statement purposes and categorized into
Autoscope video is our machine-vision product line, and revenue consists of royalties (all of which are received from Econolite), as well as a portion of international product sales. Video products are normally sold in the Intersection segment. RTMS is our radar product line, and revenue consists of international and North American product sales. Radar products are normally sold in the Highway segment. All segment revenues are derived from external customers.
Operating expenses and total assets are not allocated to the segments for internal reporting purposes. Due to the changes in how we manage our business, we may reevaluate our segment definitions in the future.
The following tables set forth selected unaudited financial information for each of our reportable segments (in thousands):
| Three Months Ended September 30, | ||||||||||||||||||
| Intersection | Highway | Total | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||
| Gross profit | ||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||
| Intangible assets | ||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||
| Intersection | Highway | Total | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||
| Gross profit | ||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||
| Intangible assets | ||||||||||||||||||
| 19 |
Note L: Restructuring and Exit Activities
In the third quarter of 2016, in order to streamline our operating and cost structure, we initiated the closure of our wholly-owned subsidiaries, Image Sensing Systems HK Limited (ISS HK) in Hong Kong and Image Sensing Systems (Shenzhen) Limited (ISS WOFE) in China. During 2020, we initiated the closure of Image Sensing Systems EMEA Limited (ISS UK) and Image Sensing Systems Holdings Limited (ISS Holdings). At September 30, 2021, Image Sensing Systems (Shenzhen) Limited was fully closed. We incurred $
In the second quarter of 2021, the Company began the process of forming a subsidiary in Chennai, India. Autoscope Technologies India Private Limited ("Autoscope India") was legally formed on October 14, 2021. Autoscope India's operations will solely focus on research and development.
Note M: Long-term Debt
Paycheck Protection Program Loan
Under the Paycheck Protection Program ("PPP"), the United States Small Business Administration ("SBA") approved the Company's application to receive a loan in the amount of $
The term of the PPP Loan was