Divestiture of Automatic License Plate Recognition Business

12 Months Ended

Dec. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Divestiture of Automatic License Plate Recognition Business

2. Divestiture of Automatic License Plate Recognition Business

On July 9, 2015, the Company entered into a share and asset sales purchase agreement (the “SAPA”) with TagMaster AB (the “Buyer”). Under the terms of the SAPA, the Company and Image Sensing Systems EMEA Limited, a wholly-owned subsidiary of the Company (“ISS EMEA”), sold to the Buyer 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 primarily used or primarily held for use in connection with its license plate recognition (LPR) business. The Buyer also agreed to assume on the closing date certain agreements and liabilities relating to the LPR business and the acquired assets. Additionally, the Company and the Buyer entered into a transitional services agreement.

Effective July 9, 2015, the LPR business qualified for discontinued operations presentation in the Company’s consolidated financial statements. In accordance with Accounting Standards Codification (“ASC”) 205-20, the results of the discontinued LPR business have been presented as discontinued operations. As such, financial results for the 12 months ended December 31, 2015 have been reported on this basis. Previously reported results for comparable periods in 2014 and 2013 have also been restated to reflect this reclassification.

The purchase price for the LPR business was $4.2 million, subject to certain customary closing adjustments based on the difference between estimated net asset value and final net asset value, of which $3.8 million has been paid to the Company. The remaining $420,000 was placed in an escrow account and will be available until July 9, 2016 to satisfy any indemnification obligations the Company may have under the SAPA. The $420,000 in escrow is classified as “discontinued operations assets” on the Company’s Consolidated Balance Sheets as of December 31, 2015. In the third quarter of 2015, the Company recorded a loss on sale of the LPR business of $1.1 million, exclusive of the impact of transaction related expenses recorded through December 31, 2015.

The operational results of the LPR business are presented in the “Net loss from discontinued operations” line item on the Consolidated Statements of Operations. Also included in this line item for the 12 months ended December 31, 2015 is the loss on sale of the LPR business and non-recurring expenses incurred by the Company as a result of the sale of the LPR business, including third party transaction specific costs. These non-recurring expenses amounted to $985,000 for the 12 months ended December 31, 2015. The loss on the sale of the LPR business had no current or prior year income tax expense impact.

In accordance with ASC 205-20, no general corporate charges were allocated to the discontinued business. The assets and liabilities of the discontinued business are presented on the Consolidated Balance Sheets as assets and liabilities from discontinued operations.

Other than consolidated amounts reflecting operating results and balances for both the continuing and discontinuing operations, all remaining amounts presented in the Consolidated Financial Statements and Notes to Consolidated Financial Statements reflect the financial results and financial position of the Company’s continuing Autoscope Video and RTMS businesses. 

Revenue, operating loss, loss on sale of business, and net loss from discontinued operations were as follows (in thousands): 

	Year Ended December 31,
	2015			2014			2013
Net Revenue	$	1,409		$	1,452		$	2,980
Operating (loss) from discontinued operations		(2,538	)		(7,688	)		(4,529	)
Loss on sale of discontinued operations		(1,081	)		—			—
Income tax expense (benefit)		(134	)		(20	)		(58	)
Net loss on discontinued operations, net of tax	$	(3,485	)	$	(7,668	)	$	(4,471	)

The major classes of assets and liabilities from discontinued operations were as follows (in thousands): 

	Year Ended December 31,
	2015		2014
Accounts receivable, net	$	—	$	1,685
Inventories		—		1,409
Other current assets		420		209
Current assets from discontinued operations		420		3,303
Property and equipment, net:		—		167
Intangible assets, net		—		3,532
Non-current assets from discontinued operations		—		3,699
Trade accounts payable		—		864
Other current liabilities		—		857
Current liabilities from discontinued operations		—		1,721
Non-current liabilities from discontinued operations	$	—	$	91