Divestiture of Automatic License Plate Recognition Business

12 Months Ended

Dec. 31, 2016

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. 

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 was paid to the Company at closing.  The remaining $420,000 was placed in an escrow account and was available until July 9, 2016 to satisfy any indemnification obligations the Company may have had under the SAPA.  The $420,000 in escrow was classified as “discontinued operations assets” on the Company's Consolidated Balance Sheets as of December 31, 2015.  The $420,000 in escrow was released to the Company during the third quarter of 2016.  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 of the discontinued business are presented on the Consolidated Balance Sheets as “discontinued operations assets.”

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.

There was no impact from discontinued operations in 2016.  Revenue, operating loss, loss on sale of business, and net loss from discontinued operations for 2015 were as follows (in thousands):

	Year Ended December 31,
	2015
Net revenue	$	1,409
Operating loss from discontinued operations		(2,538)
Loss on sale of discontinued operations		(1,081)
Income tax benefit		(134)
Net loss on discontinued operations, net of tax	$	(3,485)

 

The major classes of assets and liabilities from discontinued operations in 2015 were as follows (in thousands):

	Year Ended December 31,
	2015
Accounts receivable, net	$	-
Inventories		-
Other current assets		420
Current assets from discontinued operations		420
Property and equipment, net:		-
Intangible assets, net		-
Non-current assets from discontinued operations		-
Trade accounts payable		-
Other current liabilities		-
Current liabilities from discontinued operations		-
Non-current liabilities from discontinued operations	$	-