UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 9, 2015
Image Sensing Systems, Inc.
(Exact name of registrant as specified in its charter)
| Minnesota | 0-26056 | 41-1519168 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
| 500 Spruce Tree Centre, 1600 University Avenue West, St. Paul, Minnesota | 55104 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (651) 603-7700
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement.
On July 9, 2015, Image Sensing Systems, Inc. (the “Company”) and Image Sensing Systems EMEA Limited, a wholly-owned subsidiary of the Company (“ISS EMEA”), entered into a Share and Asset Sale and Purchase Agreement (“SAPA”) with TagMaster AB (the “Purchaser”), pursuant to which the Company and ISS EMEA sold to the Purchaser the entire issued share capital of Image Sensing Systems UK Limited, a wholly-owned subsidiary of ISS EMEA, as well as certain other assets owned by the Company, constituting the Company’s license plate recognition business (the “LPR Business”). The aggregate purchase price paid by the Purchaser for the LPR Business under the SAPA was approximately $4.2 million, subject to certain customary closing adjustments based on the difference between estimated net asset value and final net asset value. A portion of the purchase price will be held in escrow and made available to satisfy certain indemnification obligations of each party until the first anniversary of closing. The Company announced the sale of the LPR Business in its press release dated July 9, 2015, which was filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 9, 2015.
A copy of the SAPA will be attached as Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 to be filed with the Securities and Exchange Commission.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On July 9, 2015, the Company closed on its sale of the LPR Business to the Purchaser under the SAPA. The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 2.01 by reference.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information. The pro forma financial statements of the Company and its subsidiaries reflecting the closing of the sale of the LPR Business are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
(d) Exhibits
The following exhibit is being filed with this Current Report on Form 8-K:
| Exhibit No. |
Description | |
| 99.1 | Pro Forma Financial Information |
| 2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 15, 2015 | Image Sensing Systems, Inc. | |
| By: | /s/ Dale E. Parker | |
| Dale E. Parker | ||
| Interim President, Interim Chief Executive Officer and Chief Financial Officer (Interim Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
| 3 |
Exhibit Index
| Exhibit No. |
Description | |
| 99.1 | Pro Forma Financial Information | |
| 4 |
Exhibit 99.1
Image Sensing Systems, Inc.
Unaudited Pro Forma Consolidated Financial Information
The following unaudited consolidated pro forma financial information of Image Sensing Systems, Inc. and its consolidated subsidiaries (“ISS” or the “Company”) is based upon the historical statements of operations, as adjusted to reflect the disposition of its license plate recognition (“LPR”) business segment. The historical statements of operations presented in the pro forma financial information are for the three months ended March 31, 2015 as presented in the Company’s Quarterly Report on Form 10-Q filed on May 5, 2015, and for the year ended December 31, 2014 as presented in the Company’s Annual Report on Form 10-K filed on March 20, 2015. The historical balance sheet presented in the pro forma financial information is as of March 31, 2015 as was presented in the Company’s Quarterly Report on Form 10-Q filed on May 5, 2015.
The following unaudited consolidated pro forma financial information of ISS should be read in conjunction with the related notes and with the historical consolidated financial statements of ISS and the related notes included in previous filings with the Securities and Exchange Commission. The unaudited pro forma consolidated balance sheet reflects the disposition of the LPR business segment as if it occurred on March 31, 2015, while the unaudited pro forma statements on consolidated income give effect to the disposition as if it occurred on January 1, 2014. The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that ISS management believes are reasonable.
The unaudited consolidated pro forma financial information is presented for illustrative purposes only and does not purport to be indicative of the operating results or financial position that would have occurred if the transaction described above had occurred as presented in such statements. For example, this financial information does not reflect any potential earnings or other impacts form the use of the proceeds from the disposition or cost reductions previously allocated corporate costs and potential subsequent restructuring charges.
| 1 |
Image Sensing Systems, Inc.
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2015
(in thousands, except per share data)
| Image Sensing Systems Consolidated Historical | Pro Forma Adjustments LPR Disposition | Image Sensing Systems Pro Forma Consolidated | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 884 | $ | 4,200 | (a) | $ | 5,084 | |||||
| Accounts receivable, net of allowance for doubtful accounts of $147 | 4,525 | (1,387 | )(b) | 3,138 | ||||||||
| Inventories | 1,980 | (1,104 | )(b) | 876 | ||||||||
| Prepaid expenses and other current assets | 641 | (160 | )(b) | 481 | ||||||||
| Total current assets | 8,030 | 1,549 | 9,579 | |||||||||
| Property and equipment: | ||||||||||||
| Furniture and fixtures | 619 | (167 | )(b) | 452 | ||||||||
| Leasehold improvements | 562 | (157 | )(b) | 405 | ||||||||
| Equipment | 3,886 | (499 | )(b) | 3,387 | ||||||||
| 5,067 | (823 | ) | 4,244 | |||||||||
| Accumulated depreciation | 4,282 | (661 | )(b) | 3,621 | ||||||||
| 785 | (162 | ) | 623 | |||||||||
| Intangible assets, net | 3,570 | (3,237 | )(b) | 333 | ||||||||
| Deferred income taxes | 59 | — | 59 | |||||||||
| TOTAL ASSETS | $ | 12,444 | $ | (1,851 | ) | $ | 10,593 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 2,707 | $ | (361 | )(b) | $ | 2,346 | |||||
| Warranty and other current liabilities | 1,789 | (648 | )(b) | 1,141 | ||||||||
| Accrued compensation | 604 | (64 | )(b) | 540 | ||||||||
| Accrued restructuring | 32 | — | 32 | |||||||||
| Total current liabilities | 5,132 | (1,073 | ) | 4,059 | ||||||||
| Deferred income taxes | 157 | — | 157 | |||||||||
| Other long-term liabilities | 104 | 357 | (b) | 461 | ||||||||
| — | ||||||||||||
| Shareholders’ equity | — | |||||||||||
| Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued or outstanding | — | — | — | |||||||||
| Common stock, $.01 par value; 20,000,000 shares authorized, 5,005,803 issued and outstanding | 49 | — | 49 | |||||||||
| Additional paid-in capital | 23,622 | — | 23,622 | |||||||||
| Accumulated other comprehensive loss | (335 | ) | — | (335 | ) | |||||||
| Accumulated deficit | (16,285 | ) | (1,135 | )(c) | (17,420 | ) | ||||||
| Total shareholders’ equity | 7,051 | (1,135 | ) | 5,916 | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 12,444 | $ | (1,851 | ) | $ | 10,593 | |||||
See accompanying notes to the unaudited pro forma consolidated financial statements
| 2 |
Image Sensing Systems, Inc.
Unaudited Pro Forma Consolidated Statement of Operations for the three months Ending March 31, 2015
(in thousands, except per share data)
| Image
Sensing Systems Consolidated Historical | Pro
Forma Adjustments LPR Disposition | Image
Sensing Systems Pro Forma Consolidated | ||||||||||
| Consolidated Statement of Operations Data: | ||||||||||||
| Revenue: | ||||||||||||
| Product sales | $ | 2,328 | $ | 1,112 | (d) | $ | 1,216 | |||||
| Royalties | 2,011 | — | 2,011 | |||||||||
| 4,339 | 1,112 | 3,227 | ||||||||||
| Cost of revenue: | ||||||||||||
| Product sales | 1,019 | 432 | (d) | 587 | ||||||||
| 1,019 | 432 | 587 | ||||||||||
| Gross profit | 3,320 | 680 | 2,640 | |||||||||
| Operating expenses: | ||||||||||||
| Selling, marketing and product support | 1,415 | 543 | (e) | 872 | ||||||||
| General and administrative | 1,478 | 606 | (e) | 872 | ||||||||
| Research and development | 1,077 | 171 | (e) | 906 | ||||||||
| Amortization of intangible assets | 381 | 259 | (e) | 122 | ||||||||
| Restructuring | 119 | — | 119 | |||||||||
| 4,470 | 1,579 | 2,891 | ||||||||||
| Loss from operations | (1,150 | ) | (899 | ) | (251 | ) | ||||||
| Other expense, net | (1 | ) | — | (1 | ) | |||||||
| Loss before income taxes | (1,151 | ) | (899 | ) | (252 | ) | ||||||
| Income tax expense | 16 | — | 16 | |||||||||
| Net Loss | $ | (1,167 | ) | $ | (899 | ) | $ | (268 | ) | |||
| Net loss per share: | ||||||||||||
| Basic | $ | (0.23 | ) | $ | (0.18 | ) | $ | (0.05 | ) | |||
| Diluted | $ | (0.23 | ) | $ | (0.18 | ) | $ | (0.05 | ) | |||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 4,999 | 4,999 | 4,999 | |||||||||
| Diluted | 4,999 | 4,999 | 4,999 | |||||||||
See accompanying notes to the unaudited pro forma consolidated financial statements
| 3 |
Image Sensing Systems, Inc.
Unaudited Pro Forma Consolidated Statement of Operations for the twelve months Ending December 31, 2014
(in thousands, except per share data)
| Image
Sensing Systems Consolidated Historical | Pro
Forma Adjustments LPR Disposition | Image
Sensing Systems Pro Forma Consolidated | ||||||||||
| Consolidated Statement of Operations Data: | ||||||||||||
| Revenue: | ||||||||||||
| Product sales | $ | 12,806 | $ | 4,903 | (d) | $ | 7,903 | |||||
| Royalties | 10,247 | — | 10,247 | |||||||||
| 23,053 | 4,903 | 18,150 | ||||||||||
| Cost of revenue: | ||||||||||||
| Product sales | 8,041 | 3,458 | (d) | 4,583 | ||||||||
| 8,041 | 3,458 | 4,583 | ||||||||||
| Gross profit | 15,012 | 1,445 | 13,567 | |||||||||
| Operating expenses: | ||||||||||||
| Selling, marketing and product support | 9,543 | 3,691 | (e) | 5,852 | ||||||||
| General and administrative | 6,185 | 2,241 | (e) | 3,944 | ||||||||
| Research and development | 5,734 | 843 | (e) | 4,891 | ||||||||
| Amortization of intangible assets | 1,558 | 1,070 | (e) | 488 | ||||||||
| Impairment | 1,017 | 1,017 | (e) | — | ||||||||
| Restructuring | 770 | — | 770 | |||||||||
| Investigation matter | 152 | — | 152 | |||||||||
| 24,959 | 8,862 | 16,097 | ||||||||||
| Loss from operations | (9,947 | ) | (7,417 | ) | (2,530 | ) | ||||||
| Other income, net | 70 | — | 70 | |||||||||
| Loss before income taxes | (9,877 | ) | (7,417 | ) | (2,460 | ) | ||||||
| Income tax expense (benefit) | (174 | ) | 59 | (f) | (115 | ) | ||||||
| Net loss | $ | (9,703 | ) | $ | (7,476 | ) | $ | (2,345 | ) | |||
| Net loss per share: | ||||||||||||
| Basic | $ | (1.95 | ) | $ | (1.50 | ) | $ | (0.47 | ) | |||
| Diluted | $ | (1.95 | ) | $ | (1.50 | ) | $ | (0.47 | ) | |||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 4,983 | 4,983 | 4,983 | |||||||||
| Diluted | 4,983 | 4,983 | 4,983 | |||||||||
See accompanying notes to the unaudited pro forma consolidated financial statements
| 4 |
Image Sensing Systems, Inc.
Unaudited Pro Forma Consolidated Financial Information
| (a) | To reflect the cash proceeds received for the sale of the LPR business segment. |
| (b) | To reflect the removal or adjustment of LPR balance sheet accounts as set in the SAPA. |
| (c) | To reflect the estimated loss related to the sale of LPR assets |
| (d) | Represents the decrease of LPR revenue and cost of sales as if the divestiture occurred on January 1, 2014 and 2015 |
| (e) | Represents the pro forma decrease of operating costs as if the LPR divestiture occurred on January 1, 2014 and 2015 |
| (f) | Represents the pro forma decrease in income tax benefit as if the transaction occurred on January 1, 2014 |
| 5 |