10-Q/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q/A
Amendment No. 1

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2016
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________________ to ________________

Commission file number: 0-26056

Image Sensing Systems, Inc.

(Exact name of registrant as specified in its charter)

Minnesota	41-1519168
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
500 Spruce Tree Centre
1600 University Avenue West
St. Paul, MN	55104
(Address of principal executive offices)	(Zip Code)

(651) 603-7700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 o         No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x         No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 31, 2016
Common Stock, $0.01 par value per share	5,050,051 shares

IMAGE SENSING SYSTEMS, INC.

TABLE OF CONTENTS

PART II. OTHER INFORMATION............................................................................................................................3

Item 6. Exhibits………………………………………………………………………………………………………...3

SIGNATURES………………………………………………………………………………………………………..4

EXHIBIT INDEX…………………………………………………………………………………………………….5

2

EXPLANATORY NOTE

Image Sensing Systems, Inc. (the “Company”) is filing this Amendment No. 1 (the “Amendment”) to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the Securities and Exchange Commission on August 08, 2016 (the “Form 10-Q”), for the sole purpose of furnishing Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T.

                Except as described above, no other changes have been made to the Form 10-Q.  This Amendment does not reflect events occurring after the date of filing of the Form 10-Q or modify or update those disclosures presented in, or attached as exhibits to, the Form 10-Q.

PART II. OTHER INFORMATION

Item 6.         Exhibits

The following exhibits are filed as part of this Amendment No. 1 to Quarterly Report on Form 10-Q/A:

Exhibit Number	Description
10.1*	Employment Agreement between the Company and Chad A. Stelzig, dated June 27, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 24, 2016 (File No. 0-26056).
10.2*	Benefit Agreement between the Company and Richard Ehrich, dated July 28, 2014, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 24, 2016 (File No. 0-26056).
31.1	Certification of Interim Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
32.1	Certification of Interim Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
101.INS**	XBRL Instance Document (filed herewith)
101.SCH**	XBRL Taxonomy Extension Schema Document (filed herewith)
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

* Management contract or compensation arrangement

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or part of a registration statement or prospectus for purpose of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1932, as amended, and otherwise is not subject to liability under these actions.

3

SIGNATURES

In accordance with 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, thereunto duly authorized.

	Image Sensing Systems, Inc.
Dated: August 09, 2016	By:	/s/ Chad A. Stelzig
		Chad A. Stelzig
		Interim President and Interim Chief Executive Officer
		(Interim Principal Executive Officer)
Dated: August 09, 2016	By:	/s/ Richard A. Ehrich
		Richard A. Ehrich
		Interim Chief Financial Officer
		(Interim Principal Financial Officer
		and Interim Principal Accounting Officer)

4

EXHIBIT INDEX

Exhibit No.	Description
10.1*	Employment Agreement between the Company and Chad A. Stelzig, dated June 27, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 24, 2016 (File No. 0-26056).
10.2*	Benefit Agreement between the Company and Richard Ehrich, dated July 28, 2014, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 24, 2016 (File No. 0-26056).
31.1	Certification of Interim Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
32.1	Certification of Interim Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (previously filed with the Form 10-Q).
101.INS**	XBRL Instance Document (filed herewith)
101.SCH**	XBRL Taxonomy Extension Schema Document (filed herewith)
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)

* Management contract or compensation arrangement

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or part of a registration statement or prospectus for purpose of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1932, as amended, and otherwise is not subject to liability under these actions.

5

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2016 shares
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Entity Registrant Name	IMAGE SENSING SYSTEMS INC
Entity Central Index Key	0000943034
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	5,050,051
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	No

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 964	$ 2,648
Accounts receivable, net of allowance for doubtful accounts of $104 and $138, respectively	4,239	3,063
Inventories	229	648
Prepaid expenses and other current assets	437	445
Total current assets	5,869	6,804
Property and equipment:
Furniture and fixtures	488	491
Leasehold improvements	431	426
Equipment	3,511	3,397
Total Property and equipment:	4,430	4,314
Accumulated depreciation	3,977	3,796
Total Property and equipment:	453	518
Intangible assets, net	2,335	1,210
Deferred income taxes	20	19
Discontinued operations assets	420	420
TOTAL ASSETS	9,097	8,971
Current liabilities:
Accounts payable	1,390	1,519
Warranty	610	760
Accrued compensation	370	722
Other current liabilities	382	573
Accrued restructuring	33	0
Total current liabilities	2,785	3,574
Shareholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued or outstanding	0	0
Common stock, $.01 par value; 20,000,000 shares authorized, 5,050,051 and 5,028,000 issued and outstanding at June 30, 2016 and December 31, 2015, respectively.	50	49
Additional paid-in capital	23,886	23,826
Accumulated other comprehensive loss	(305)	(258)
Accumulated deficit	(17,319)	(18,220)
Total shareholders' equity	6,312	5,397
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 9,097	$ 8,971

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
allowance for doubtful accounts	$ 104	$ 138
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000,000	5,000,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	20,000,000,000	20,000,000,000
Common stock shares issued	5,050,051,000	5,028,000,000
Common stock shares outstanding	5,050,051,000	5,028,000,000

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Product sales	$ 2,321	$ 1,798	$ 3,935	$ 3,014
Royalties	2,356	2,609	3,980	4,620
Total Revenue:	4,677	4,407	7,915	7,634
Cost of revenue:
Product sales	964	856	1,882	1,443
Total Cost of revenue:	964	856	1,882	1,443
Gross profit	3,713	3,551	6,033	6,191
Operating expenses:
Selling, general and administrative	1,916	1,836	3,605	3,580
Research and development	603	959	1,397	1,865
Amortization of intangible assets	0	123	0	245
Restructuring	0	0	126	119
Total Operating expenses:	2,519	2,918	5,128	5,809
Operating income from continuing operations	1,194	633	905	382
Other, net	1	30	0	29
Income from continuing operations before income taxes	1,195	663	905	411
Income tax expense	2	8	4	24
Net income from continuing operations	1,193	655	901	387
Net loss from discontinued operations, net of tax	0	(1,397)	0	(2,296)
Net income (loss)	$ 1,193	$ (742)	$ 901	$ (1,909)
Basic
Continuing operations	$ 0.24	$ 0.13	$ 0.18	$ 0.08
Discontinued operations	0	(0.28)	0	(0.46)
Net basic income (loss) per share	0.24	(0.15)	0.18	(0.38)
Diluted
Continuing operations	0.24	0.13	0.18	0.08
Discontinued operations	0	(0.28)	0	(0.46)
Net diluted income (loss) per share	$ 0.24	$ (0.15)	$ 0.18	$ (0.38)
Weighted average number of common shares outstanding:
Basic	5,041	5,008	5,035	5,003
Diluted	5,041	5,008	5,035	5,003

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Net income (loss)	$ 1,193	$ (742)	$ 901	$ (1,909)
Other comprehensive income (loss):
Foreign currency translation adjustment	(48)	158	(47)	(19)
Comprehensive income (loss)	$ 1,145	$ (584)	$ 854	$ (1,928)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Operating activities:
Net income from continuing operations	$ 901	$ 387
Net loss from discontinued operations, net of tax	0	(2,296)
Net income (loss)	901	(1,909)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation	149	146
Amortization	0	245
Stock-based compensation	60	151
Loss on disposal of assets	1	4
Changes in operating assets and liabilities:
Accounts receivable, net	(1,176)	(1,347)
Inventories	419	97
Prepaid expenses and other current assets	8	197
Accounts payable	(129)	283
Accrued expenses and other current liabilities	(660)	99
Net cash used for continuing operating activities	(427)	(2,034)
Net cash provided by discontinued operating activities	0	34
Net cash used for operating activities	(427)	(2,000)
Investing activities:
Capitalized software development costs	(1,124)	0
Purchases of property and equipment	(73)	(29)
Net cash used for continuing investing activities	(1,197)	(29)
Net cash used for discontinued investing activities	0	(33)
Net cash used for investing activities	(1,197)	(62)
Effect of exchange rate changes on cash	(60)	(19)
Decrease in cash and cash equivalents	(1,684)	(2,081)
Cash and cash equivalents at beginning of period	2,648	2,656
Cash and cash equivalents at end of period	$ 964	$ 575

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Basis of Presentation

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note A: Basis of Presentation

Image Sensing Systems, Inc. (referred to herein as “we,” the “Company,” “us” and “our”) develops and markets software-based computer enabled detection products for use in traffic, security, police and parking applications. 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 six month periods ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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, 2015 as filed with the SEC.

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 on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer have occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled.

Certain sales may contain multiple elements for revenue recognition purposes. We consider each deliverable that provides value to the customer on a standalone basis as a separable element. Separable elements in these arrangements may include the hardware, software, installation services, training and support. We initially allocate consideration to each separable element using the relative selling price method. Selling prices are determined by us based on either vendor‑specific objective evidence (“VSOE”) (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, our best estimate of the selling price. Factors considered by us in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by us to provide the deliverable, as well as our historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training may not be considered separable. Under those circumstances, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer.

 

Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts.

Econolite Control Products, Inc. (Econolite) is our licensee that sells certain of our products in the United States, Mexico, Canada and the Caribbean. The royalty of approximately 50% of the gross profit on licensed products is recognized when the products are shipped or delivered by Econolite to its customers.

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.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority.

Inventories

Inventories are primarily electronic components and finished goods and are valued at the lower of cost or market on the first-in, first-out accounting method.

Income Taxes

We record a tax provision for the anticipated tax consequences of the 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 deferred tax assets. In the event that 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

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 quarterly impairment. At both June 30, 2016 and December 31, 2015, we determined there was no impairment of intangible assets.  At both June 30, 2016 and December 31, 2015, there were no indefinite‑lived 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. A certain amount of judgment and estimation is required to assess when technological feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs.  In evaluating the recoverability of capitalized software costs, the Company compares expected product performance, utilizing forecasted revenue amounts, to the total costs incurred to date and estimates of additional costs to be incurred.  If revised forecasted product revenue is less than, and/or revised forecasted costs are greater than, the previously forecasted amounts, the net realizable value may be lower than previously estimated, which could result in the recognition of an impairment charge in the period in which such a determination is made.

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Divestiture of Automatic License Plate Recognition Business

6 Months Ended

Jun. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Divestiture of Automatic License Plate Recognition Business

Note B: Divestiture of Automatic License Plate Recognition Business

On July 9, 2015, the Company entered into a share and asset sales purchase agreement (the share and asset purchase agreement, “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 also entered into a transitional services agreement.

 

Effective July 9, 2015, the LPR business qualified for discontinued operations presentation in the Company's condensed 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 effective with the reporting of financial results for the third quarter of 2015.  As such, financial results for the three and six months ended June 30, 2016 have been reported on this basis.  Previously reported results for the three and six months ended June 30, 2015 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 is available 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 Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015. 

The operational results of the LPR business are presented in the “Net loss from discontinued operations, net of tax” line item on the Condensed Consolidated Statements of Operations.  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 Condensed Consolidated Balance Sheets as assets and liabilities from discontinued operations.

Other than consolidated amounts reflecting operating results and balances for both the continuing and discontinued operations, all remaining amounts presented in the accompanying condensed consolidated financial statements and notes reflect the financial results and financial position of the Company's continuing Autoscope® Video (“Autoscope”) and RTMS® (“RTMS”) businesses.

Revenue, operating loss from discontinued operations were as follows (in thousands):

	Three-Month Periods Ended June 30,				Six-Month Periods Ended June 30,
	2016		2015		2016		2015
Net revenue	$	-	$	653	$	-	$	1,333
Operating loss from discontinued operations		-		(1,397)		-		(2,296)
Net loss on discontinued operations, net of tax	$	-	$	(1,397)	$	-	$	(2,296)

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2016

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note C: Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation-Stock Compensation (Topic 718).”  ASU 2016-09 provides new guidance on how an entity should account for stock compensation.  This new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted.  The new standard must be adopted using a modified retrospective and a prospective transition.  In addition, the transition will require application of the new guidance at the beginning of the earliest comparative period presented.  We are currently determining our implementation approach and assessing the impact of ASU 2016-02 on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” ASU 2016-02 provides new guidance on how an entity should account for leases and recognize associated lease assets and liabilities.  This new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted.  The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients.  In addition, the transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently determining our implementation approach and assessing the impact of ASU 2016-02 on the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 provides guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 specifies accounting for costs associated with obtaining or fulfilling contracts with customers and expands the required disclosures related to revenue and cash flows from contracts with customers.

 

On July 9, 2015, the FASB affirmed its proposal to defer the effective date of ASU 2014-09 for all entities by one year.  As a result, public business entities, certain not-for-profit entities, and certain employee benefit plans will apply this new revenue standard to annual reporting periods beginning after December 15, 2017.  All other entities will apply this new revenue standard to annual reporting periods beginning after December 15, 2018.  Additionally, the FASB affirmed its proposal to permit all entities to apply ASU 2014-09 early, but not before the original effective date for public business entities, certain not-for-profit entities, and certain employee benefit plans (that is, annual periods beginning after December 15, 2016).  Entities choosing to implement early will apply ASU 2014-09 to all interim reporting periods within the year of adoption.

The Company is currently determining its implementation approach and assessing the impact of ASU 2014-09 on the consolidated financial statements.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Measurements [Abstract]

Fair Value Measurements

Note D: 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.

Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis

Our intangible assets and other long‑lived assets are nonfinancial assets that were acquired either as part of a business combination, individually or with a group of other assets. These nonfinancial assets were initially, and have historically been, measured and recognized at amounts equal to the fair value determined as of the date of acquisition.

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 assets and liabilities.

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Inventories

6 Months Ended

Jun. 30, 2016

Inventories [Abstract]

Inventories

Note E: Inventories

Inventories consisted of the $229,000 and $648,000 of finished goods as of June 30, 2016 and December 31, 2015, respectively.

 

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Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Note F: Intangible Assets

Intangible assets consisted of the following (dollars in thousands):

	June 30, 2016
							Weighted
	Gross				Net		Average
	Carrying		Accumulated		Carrying		Useful Life
	Amount		Amortization		Value		(in Years)
Developed technology	$	3,900		(3,900)	$	-	-
Software development costs		2,335		-		2,335	-
Total	$	6,235	$	(3,900)	$	2,335	-

	December 31, 2015
							Weighted
	Gross				Net		Average
	Carrying		Accumulated		Carrying		Useful Life
	Amount		Amortization		Value		(in Years)
Developed technology	$	3,900	$	(3,900)	$	-	-
Software development costs		1,210		-		1,210	-
Total	$	5,110	$	(3,900)	$	1,210	-

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Credit Facilities

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Credit Facilities

Note G:  Credit Facilities

In May 2014, the Company entered into a credit agreement and related documents with Alliance Bank providing for a revolving line of credit for the Company. The credit agreement and related documents with Alliance Bank (collectively, the “Alliance Credit Agreement”) provides up to a $5.0 million revolving line of credit. Amounts due under the Alliance Credit Agreement bear interest at a fixed annual rate of 3.95%. Any advances are secured by the Company's inventories, accounts receivable, cash, marketable securities, and equipment. We are subject to certain covenants under the Alliance Credit Agreement. In April 2016, we entered into an agreement with Alliance Bank amending the Alliance Credit Agreement to extend the maturity date from April 1, 2016 to May 12, 2017.  At June 30, 2016, we had no borrowings under the Alliance Credit Agreement, and we were in compliance with all financial covenants.  For the quarter ended June 30, 2016, available borrowings is $542,000.

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Warranties

6 Months Ended

Jun. 30, 2016

Product Warranties Disclosures [Abstract]

Warranties

Note H: Warranties

We generally provide a two to five year warranty on product sales. Reserves to honor warranty claims are estimated and recorded at the time of sale based on historical claim information and are analyzed and adjusted periodically based on claim trends.

Warranty liability and related activity consisted of the following (in thousands):

	Six-Month Periods Ended June 30,
	2016		2015
Beginning balance	$	760	$	824
Warranty provisions		81		59
Warranty claims		(147)		(115)
Adjustments to preexisting warranties		(84)		(102)
Ending balance	$	610	$	666

 

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Note I: Stock-Based Compensation

We compensate officers, directors and key employees with stock-based compensation under stock option and incentive plans approved by our shareholders and administered under the supervision of our Board of Directors. 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 proportionally over periods of three to five years from the dates of the grant, beginning one year from the date of grant, and have a contractual term of nine to ten years.

Performance stock options are time based; however, the final number of awards earned and the related compensation expense is adjusted up or down to the extent the performance target is met. The actual number of shares that will ultimately vest ranges from 90% to 100% of the targeted amount if the minimum performance target is achieved.  For performance stock awards granted in 2015, the performance target was operating income. We evaluate the likelihood of meeting the performance target at each reporting period and adjust compensation expense, on a cumulative basis, based on the expected achievement of each performance target.

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 June 30, 2016 and 2015 was $1,000 and $76,000, respectively.  Stock-based compensation expense included in general and administrative expense for the six-month periods ended June 30, 2016 and 2015 was $60,000 and $151,000, respectively.  At June 30, 2016, 345,752 shares were available for grant under the Company's stock option and incentive plan.

Stock Options

A summary of the option activity for the first six months of 2016 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, 2015	307,750	$        5.96	6.3	$               46
Granted	-	$            -	-	$               -
Exercised	-	$            -	-	$               -
Expired	(8,000)	$      12.50	-	$               -
Forfeited	(58,000)	$        5.26	-	$               -
Options outstanding at June 30, 2016	241,750	$        5.91	5.7	$               -
Options exercisable at June 30, 2016	202,250	$        6.07	5.3	$               -

 

There were no options exercised during the three and six-month periods ended June 30, 2016 and June 30, 2015. As of June 30, 2016, there was $64,000 of total unrecognized compensation cost related to non-vested stock options. The weighted average period over which the compensation cost is expected to be recognized is 1.6 years.

Restricted Stock Awards and Stock Awards

We issue restricted stock awards to executive officers.  These awards may contain certain performance conditions or time based vesting criteria.  Executive officers vest in the restricted stock awards if the various performance or time-based metrics are met.  Performance restricted stock awards are valued based on the market value of the shares at the date of grant with the compensation expense recognized over the vesting periods.

We 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. Compensation expense related to stock awards is determined on the grant date based on the publicly quoted fair market value of our common stock and is charged to earnings on the grant date. 

A summary of the restricted stock awards and stock award activity for the first six months of 2016 is as follows:

	Number of Shares	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Awards outstanding at December 31, 2015	-	-	$               -
Granted	131,689	-	$      351,521
Exercised	(22,051)	-	$        54,249
Expired	-	-	$               -
Forfeited	(99,638)	-	$               -
Awards outstanding at June 30, 2016	10,000	0.49	$        22,400
Awards exercisable at June 30, 2016	-	-	$               -

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Income (Loss) per Common Share

6 Months Ended

Jun. 30, 2016

Income (Loss) per Common Share [Abstract]

Income (Loss) per Common Share

Note J: Income (Loss) per Common Share

Net income (loss) 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 using the treasury stock method. Under the treasury stock method, shares subject to certain outstanding stock options have been excluded from the diluted weighted average shares outstanding calculation because the exercise of those options would lead to a net reduction in common shares outstanding. As a result, stock options to acquire 296,640 and 351,000 weighted common shares have been excluded from the diluted weighted shares outstanding for the three-month periods ended June 30, 2016 and 2015, respectively, and 300,271 and 557,000 weighted common shares have been excluded from the diluted weighted shares outstanding for the six-month periods ended June 30, 2016 and 2015, respectively.

 

A reconciliation of net income (loss) per share is as follows (dollar amounts in thousands except per share data):

	Three-Month Periods Ended June 30,				Six-Month Periods Ended June 30,
	2016		2015		2016		2015
Numerator:
Net income from continuing operations	$	1,193	$	655	$	901	$	387
Net loss from discontinued operations	$	-	$	(1,397)	$	-	$	(2,296)
Net income (loss) from continuing operations	$	1,193	$	(742)	$	901	$	(1,909)
Denominator:
Weighted average common shares outstanding		5,041		5,008		5,035		5,003
Dilutive potential common shares		-		-		-		-
Shares used in diluted net loss per common share calculations		5,041		5,008		5,035		5,003
Basic net earnings (loss) per common share
Continuing operations	$	0.24	$	0.13	$	0.18	$	0.08
Discontinued operations	$	-	$	(0.28)	$	-	$	(0.46)
Net basic earnings (loss) per share	$	0.24		(0.15)	$	0.18		(0.38)
Diluted net earnings (loss) per common share
Continuing operations	$	0.24	$	0.13	$	0.18	$	0.08
Discontinued operations	$	-	$	(0.28)	$	-	$	(0.46)
Net diluted earnings (loss) per share	$	0.24	$	(0.15)	$	0.18	$	(0.38)

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Segment Information

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segment Information

Note K: Segment Information

The Company's Interim 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 two reportable segments:  Intersection and Highway.  

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. Until July 9, 2015, Autoscope license plate recognition was our LPR product line and was the Company's third operating segment.  All segment revenues are derived from external customers. 

 

As described in Note B to these Notes to the Condensed Consolidated Financial Statements, effective on July 9, 2015, we sold our LPR business.  Therefore, effective on that date, the LPR business qualified for discontinued operations presentation in the Company's condensed consolidated financial statements, and the results of the discontinued LPR business have been presented as discontinued operations effective with the reporting of financial results for the three months ended September 30, 2015.  Financial results for the three and six months ended June 30, 2016 have been reported on this basis, and previously reported results for the three and six months ended June 30, 2015 have also been restated to reflect this classification.  Therefore, the following tables do not include financial results for the Company's LPR business segment.

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 June 30,
	Intersection				Highway				Total
	2016		2015		2016		2015		2016		2015
Revenue	$	2,697	$	3,189	$	1,980	$	1,218	$	4,677	$	4,407
Gross profit		2,534		2,750		1,179		801		3,713		3,551
Amortization of intangible assets		-		-		-		123		-		123
Intangible assets		2,335		-		-		210		2,335		210
	Six Months Ended June 30,
	Intersection				Highway				Total
	2016		2015		2016		2015		2016		2015
Revenue	$	4,601	$	5,350	$	3,314	$	2,284	$	7,915	$	7,634
Gross profit		4,252		4,828		1,781		1,363		6,033		6,191
Amortization of intangible assets		-		-		-		245		-		245
Intangible assets		2,335		-		-		210		2,335		210

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Restructuring

6 Months Ended

Jun. 30, 2016

Restructuring [Abstract]

Restructuring

Note L: Restructuring

In the first quarter of 2016, the Company implemented restructuring plans in Canada. Because of these actions, restructuring charges of approximately $126,000 were recorded in the first six months of 2016 related to employee terminations.

The following table shows the restructuring activity for the six months ended June 30, 2016 (in thousands):

		Facility Costs
	Termination	and Contract
	Benefits	Termination	Total
Balance at January 1, 2016	$            -	$            -	$            -
Charges	126	-	126
Payments/settlements	-	-	-
Balance at March 31, 2016	$         126	$            -	$         126
Payments/settlements	(93)	-	(93)
Balance at June 30, 2016	$           33	$            -	$           33

 

In the fourth quarter of 2014, the Company implemented restructuring plans to close our offices in Asia.  Because of these actions, restructuring charges of approximately $119,000 were recorded in the first six months of 2015 related to employee terminations.

The following table shows the restructuring activity for the six months ended June 30, 2015 (in thousands):

		Facility Costs
	Termination	and Contract
	Benefits	Termination	Total
Balance at January 1, 2015	$         190	$           26	$         216
Charges	119	-	119
Payments/settlements	(295)	(8)	(303)
Balance at March 31, 2015	$           14	$           18	$           32
Charges	-	-	-
Payments/settlements	(14)	(18)	(32)
Balance at June 30, 2015	$            -	$            -	$            -

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note M: Commitments and Contingencies

Litigation

We are involved from time to time in various legal proceedings arising in the ordinary course of our business, including primarily commercial, product liability, employment and intellectual property claims. In accordance with GAAP, we record a liability in our Condensed Consolidated Financial Statements with respect to any of these matters when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. With respect to any currently pending legal proceedings, we have not established an estimated range of reasonably possible additional losses either because we believe that we have valid defenses to claims asserted against us or the proceeding has not advanced to a stage of discovery that would enable us to establish an estimate. We currently do not expect the outcome of these matters to have a material effect on our consolidated results of operations, financial position or cash flows. Litigation, however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against us could adversely impact our results of operations, financial position or cash flows. We expense legal costs as incurred.

 

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Revenue Recognition

Revenue Recognition

We recognize revenue on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer have occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled.

Certain sales may contain multiple elements for revenue recognition purposes. We consider each deliverable that provides value to the customer on a standalone basis as a separable element. Separable elements in these arrangements may include the hardware, software, installation services, training and support. We initially allocate consideration to each separable element using the relative selling price method. Selling prices are determined by us based on either vendor‑specific objective evidence (“VSOE”) (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, our best estimate of the selling price. Factors considered by us in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by us to provide the deliverable, as well as our historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training may not be considered separable. Under those circumstances, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer.

Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts.

Econolite Control Products, Inc. (Econolite) is our licensee that sells certain of our products in the United States, Mexico, Canada and the Caribbean. The royalty of approximately 50% of the gross profit on licensed products is recognized when the products are shipped or delivered by Econolite to its customers.

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.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority.

Inventories

Inventories

Inventories are primarily electronic components and finished goods and are valued at the lower of cost or market on the first-in, first-out accounting method.

Income Taxes

Income Taxes

We record a tax provision for the anticipated tax consequences of the 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 deferred tax assets. In the event that 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

Intangible Assets

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 quarterly impairment. At both June 30, 2016 and December 31, 2015, we determined there was no impairment of intangible assets.  At both June 30, 2016 and December 31, 2015, there were no indefinite‑lived 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. A certain amount of judgment and estimation is required to assess when technological feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs.  In evaluating the recoverability of capitalized software costs, the Company compares expected product performance, utilizing forecasted revenue amounts, to the total costs incurred to date and estimates of additional costs to be incurred.  If revised forecasted product revenue is less than, and/or revised forecasted costs are greater than, the previously forecasted amounts, the net realizable value may be lower than previously estimated, which could result in the recognition of an impairment charge in the period in which such a determination is made.

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Divestiture of Automatic License Plate Recognition Business (Tables)

6 Months Ended

Jun. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Revenue, operating loss from discontinued

Revenue, operating loss from discontinued operations were as follows (in thousands):

	Three-Month Periods Ended June 30,				Six-Month Periods Ended June 30,
	2016		2015		2016		2015
Net revenue	$	-	$	653	$	-	$	1,333
Operating loss from discontinued operations		-		(1,397)		-		(2,296)
Net loss on discontinued operations, net of tax	$	-	$	(1,397)	$	-	$	(2,296)

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

Intangible assets consisted of the following (dollars in thousands):

	June 30, 2016
							Weighted
	Gross				Net		Average
	Carrying		Accumulated		Carrying		Useful Life
	Amount		Amortization		Value		(in Years)
Developed technology	$	3,900		(3,900)	$	-	-
Software development costs		2,335		-		2,335	-
Total	$	6,235	$	(3,900)	$	2,335	-

	December 31, 2015
							Weighted
	Gross				Net		Average
	Carrying		Accumulated		Carrying		Useful Life
	Amount		Amortization		Value		(in Years)
Developed technology	$	3,900	$	(3,900)	$	-	-
Software development costs		1,210		-		1,210	-
Total	$	5,110	$	(3,900)	$	1,210	-

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Warranties (Tables)

6 Months Ended

Jun. 30, 2016

Product Warranties Disclosures [Abstract]

Warranty liability and related activity

Warranty liability and related activity consisted of the following (in thousands):

	Six-Month Periods Ended June 30,
	2016		2015
Beginning balance	$	760	$	824
Warranty provisions		81		59
Warranty claims		(147)		(115)
Adjustments to preexisting warranties		(84)		(102)
Ending balance	$	610	$	666

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

A summary of the option options

A summary of the option activity for the first six months of 2016 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, 2015	307,750	$        5.96	6.3	$               46
Granted	-	$            -	-	$               -
Exercised	-	$            -	-	$               -
Expired	(8,000)	$      12.50	-	$               -
Forfeited	(58,000)	$        5.26	-	$               -
Options outstanding at June 30, 2016	241,750	$        5.91	5.7	$               -
Options exercisable at June 30, 2016	202,250	$        6.07	5.3	$               -

A summary of the restricted stock awards and stock awards

A summary of the restricted stock awards and stock award activity for the first six months of 2016 is as follows:

	Number of Shares	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Awards outstanding at December 31, 2015	-	-	$               -
Granted	131,689	-	$      351,521
Exercised	(22,051)	-	$        54,249
Expired	-	-	$               -
Forfeited	(99,638)	-	$               -
Awards outstanding at June 30, 2016	10,000	0.49	$        22,400
Awards exercisable at June 30, 2016	-	-	$               -

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Income (Loss) per Common Share (Tables)

6 Months Ended

Jun. 30, 2016

Income (Loss) per Common Share [Abstract]

Schedule of reconciliation of earnings per share

A reconciliation of net income (loss) per share is as follows (dollar amounts in thousands except per share data):

	Three-Month Periods Ended June 30,				Six-Month Periods Ended June 30,
	2016		2015		2016		2015
Numerator:
Net income from continuing operations	$	1,193	$	655	$	901	$	387
Net loss from discontinued operations	$	-	$	(1,397)	$	-	$	(2,296)
Net income (loss) from continuing operations	$	1,193	$	(742)	$	901	$	(1,909)
Denominator:
Weighted average common shares outstanding		5,041		5,008		5,035		5,003
Dilutive potential common shares		-		-		-		-
Shares used in diluted net loss per common share calculations		5,041		5,008		5,035		5,003
Basic net earnings (loss) per common share
Continuing operations	$	0.24	$	0.13	$	0.18	$	0.08
Discontinued operations	$	-	$	(0.28)	$	-	$	(0.46)
Net basic earnings (loss) per share	$	0.24		(0.15)	$	0.18		(0.38)
Diluted net earnings (loss) per common share
Continuing operations	$	0.24	$	0.13	$	0.18	$	0.08
Discontinued operations	$	-	$	(0.28)	$	-	$	(0.46)
Net diluted earnings (loss) per share	$	0.24	$	(0.15)	$	0.18	$	(0.38)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Schedule of financial information by reportable segment

The following tables set forth selected unaudited financial information for each of our reportable segments (in thousands):

	Three Months Ended June 30,
	Intersection				Highway				Total
	2016		2015		2016		2015		2016		2015
Revenue	$	2,697	$	3,189	$	1,980	$	1,218	$	4,677	$	4,407
Gross profit		2,534		2,750		1,179		801		3,713		3,551
Amortization of intangible assets		-		-		-		123		-		123
Intangible assets		2,335		-		-		210		2,335		210
	Six Months Ended June 30,
	Intersection				Highway				Total
	2016		2015		2016		2015		2016		2015
Revenue	$	4,601	$	5,350	$	3,314	$	2,284	$	7,915	$	7,634
Gross profit		4,252		4,828		1,781		1,363		6,033		6,191
Amortization of intangible assets		-		-		-		245		-		245
Intangible assets		2,335		-		-		210		2,335		210

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Restructuring (Tables)

6 Months Ended

Jun. 30, 2016

Restructuring [Abstract]

Schedule of restructuring activity

The following table shows the restructuring activity for the six months ended June 30, 2016 (in thousands):

		Facility Costs
	Termination	and Contract
	Benefits	Termination	Total
Balance at January 1, 2016	$            -	$            -	$            -
Charges	126	-	126
Payments/settlements	-	-	-
Balance at March 31, 2016	$         126	$            -	$         126
Payments/settlements	(93)	-	(93)
Balance at June 30, 2016	$           33	$            -	$           33

The following table shows the restructuring activity for the six months ended June 30, 2015 (in thousands):

		Facility Costs
	Termination	and Contract
	Benefits	Termination	Total
Balance at January 1, 2015	$         190	$           26	$         216
Charges	119	-	119
Payments/settlements	(295)	(8)	(303)
Balance at March 31, 2015	$           14	$           18	$           32
Charges	-	-	-
Payments/settlements	(14)	(18)	(32)
Balance at June 30, 2015	$            -	$            -	$            -

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Basis of Presentation (Details Text)	6 Months Ended
	Jun. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Royalty percentage of gross profit on licensed products	50.00%

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Divestiture of Automatic License Plate Recognition Business (Details Narrative) - USD ($) $ in Thousands	Jul. 09, 2015	Jun. 30, 2016	Dec. 31, 2015
Discontinued Operations and Disposal Groups [Abstract]
Cash consideration from sale of business	$ 4,200
Net proceeds from sale of business	$ 3,800
Discontinued operations assets		$ 420	$ 420

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Divestiture of Automatic License Plate Recognition Business (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015
Discontinued Operations and Disposal Groups [Abstract]
Net revenue	$ 653	$ 1,333
Operating loss from continuing operations	(1,397)	(2,296)
Net loss on discontinued operations, net of tax	$ (1,397)	$ (1,397)

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Inventories (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventories [Abstract]
Finished goods	$ 229,000	$ 648,000

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Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Gross Carrying Amount	$ 6,235	$ 5,110
Accumulated Amortization	(3,900)	(3,900)
Net Carrying Value	2,355	1,210
Developed Technology Rights [Member]
Goodwill and Intangible Assets Disclosure [Abstract]
Gross Carrying Amount	3,900	3,900
Accumulated Amortization	(3,900)	(3,900)
Computer Software Intangible Asset
Goodwill and Intangible Assets Disclosure [Abstract]
Gross Carrying Amount	2,335	1,210
Net Carrying Value	$ 2,335	$ 1,210

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Credit Facilities (Details) - USD ($)
$ in Thousands

6 Months Ended

May 12, 2014

Jun. 30, 2016

Debt Disclosure [Abstract]

Maxiumum borrowing line of credit capacity

$ 5,000

Interest rate

3.95%

Description of collateral

Inventories, accounts receivable, cash, marketablesecurities, and equipment

Expiration

Apr. 01, 2016

May 12, 2017

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Warranties (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Product Warranties Disclosures [Abstract]
Beginning balance	$ 760	$ 824
Warranty provisions	81	59
Warranty claims	(147)	(115)
Adjustments to preexisting warranties	(84)	(102)
Ending balance	$ 610	$ 666

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Stock-Based Compensation (Details Narrative) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock awards, weighted average grant date fair value	$ 2.46
Stock-based compensation expense	$ 1	$ 76	$ 60	$ 151
Shares available for grant	345,752		345,752
Unrecognized compensation cost related to non-vested stock options	$ 64		$ 64
Period for recognition of unrecognized compensation cost related to non-vested stock options	1 year 6 months
Restricted Stock [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Vesting rights description of stock awards granted	Executive officers vest in the restricted stock awards if the various performance or time-based metrics are met.
Stock awards granted	109,638
Stock awards, weighted average grant date fair value	$ 2.71
Stock Awards [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock awards granted	22,051
Minimum [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock option awards, vesting term	3 years
Stock option awards, contractual term	9 years
Percentage of vesting shares	90.00%
Maximum [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock option awards, vesting term	5 years
Stock option awards, contractual term	10 years
Percentage of vesting shares	100.00%

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Stock-Based Compensation (Details)	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares
Number of Shares
Outstanding - beginning of period | shares	307,750
Forfeited | shares	(58,000)
Expired | shares	(8,000)
Outstanding - end of period | shares	241,750
Exercisable - end of period | shares	202,250
Weighted Average Exercise Price
Outstanding - beginning of period | $ / shares	$ 5.96
Forfeited | $ / shares	5.26
Expired | $ / shares	12.50
Outstanding - end of period | $ / shares	5.91
Exercisable - end of period | $ / shares	$ 6.07
Weighted Average Remaining Contractual Term
Outstanding	5 years 7 months
Options exercisable	5 years 3 months
Aggregate Intrinsic Value
Outstanding - beginning of period | $	$ 46

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Income (Loss) per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income (Loss) per Common Share [Abstract]
Continuing operations	$ 0.24	$ 0.13	$ 0.18	$ 0.08
Discontinued operations	0	(0.28)	0	(0.46)
Net diluted earnings (loss) per share	0.24	(0.15)	0.18	(0.38)
Net basic earnings (loss) per share	$ 0.24	$ (0.15)	$ 0.18	$ (0.38)
Numerator:
Net income from continuing operations	$ 1,193	$ 655	$ 901	$ 387
Net loss from discontinued operations	0	(1,397)	0	(2,296)
Net income (loss)	$ 1,193	$ (742)	$ 901	$ (1,909)
Denominator:
Weighted average common shares outstanding	5,041	5,008	5,035	5,003
Shares used in diluted net income (loss) per common share calculations	5,041	5,008	5,035	5,003
Shares excluded from diluted weighted shares outstanding	296,640	351,000	300,271	557,000

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Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Segment Reporting [Abstract]
Revenue	$ 4,677	$ 4,407	$ 7,915	$ 7,634
Gross profit	3,713	3,551	6,033	6,191
Amortization of intangible assets	0	123	0	245
Intangible assets	2,335	210	2,335	210
Intersection [Member]
Segment Reporting [Abstract]
Revenue	2,697	3,189	4,601	5,350
Gross profit	2,534	2,750	4,252	4,828
Intangible assets	2,335		2,335
Highway [Member]
Segment Reporting [Abstract]
Revenue	1,980	1,218	3,314	2,284
Gross profit	$ 1,179	801	$ 1,781	1,363
Amortization of intangible assets		123		245
Intangible assets		$ 210		$ 210

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Restructuring (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2016	Jun. 30, 2015
Restructuring Reserve [Roll Forward]
Balance at beginning of period	$ 126		$ 32	$ 216		$ 216
Payments/Settlements	93		32	303		93
Charges		$ 126		119	$ 126	119
Payments/Settlements	(93)		(32)	(303)		(93)
Balance at end of period		126		32
Employee Severance [Member]
Restructuring Reserve [Roll Forward]
Balance at beginning of period	126		14	190		190
Payments/Settlements	93		14	295	93	309
Charges		126		119	126
Payments/Settlements	$ (93)		(14)	(295)	$ (93)	(309)
Balance at end of period		$ 126		14
Facility Costs And Contract Termination [Member]
Restructuring Reserve [Roll Forward]
Balance at beginning of period			18	26		26
Payments/Settlements			(18)	(8)		(26)
Payments/Settlements			$ 18	8		$ 26
Balance at end of period				$ 18

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Restructuring (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Restructuring [Abstract]
Restructuring charges related to facility closures	$ 126	$ 119