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1、Annual Report 2015We are encouraged by Image Sensing Systems performance in 2015.We met,or exceeded,our internal expectations for several of our key operating metrics,including operating expense management and margin levels.We achieved these results while we continued to invest in our future and enh
2、ance our product and service offering.We believe that the steps we have taken in 2015 will help position the company for sustainable growth.Last year we concentrated on profitability metrics such as product gross margins as well as spending on sales,general and administrative costs.Simultaneously,we
3、 continue to judiciously invest in research and development to insure we are positioned for the future.Since last year,our operating expenses,as compared to revenue,improved approximately 28 percentage points and our gross margin from continuing operations for the year was 77 percent,an increase of
4、200 basis points from the prior year.We expect to continue to improve and align operations to meet world-wide demand levels and for a more profitable future.2015-A Year of Transition and FocusWe remain focused on the future of our business and restoring profitability levels,in 2015 we made the decis
5、ion to sell our license plate recognition(LPR)business to TagMaster AB.We decided to shift our strategic direction on the Intelligent Transportation Systems(ITS)market by investing in our Autoscope video and RTMS radar products and solutions.We are concentrating on leveraging these core competencies
6、.We believe the ITS market will continue to grow.As agencies accelerate transition from in-ground technologies,we believe our products are the best alternative.With the sale of our LPR business,we gained a renewed energy for our video and radar products and solutions.We believe that our combination
7、of technology solutions remain a key component to providing cities the infrastructure needed to reduce congestion.We remain dedicated to a number of key initiatives including the development and quality of our products and partnerships.This year we celebrate our 25th Anniversary of Autoscope video d
8、etection.Over the last twenty-five years,Autoscope products have been improving traffic information,systems performance and cost efficiencies and ultimately,helping traffic managers improve safety and mitigate traffic congestion.Autoscope has continued to evolve over the years to meet the market dem
9、ands.This tradition of innovation continues today,as we develop our next generation products and solutions.During 2015,we invested$4.3 million in Autoscope video detection products and solutions and anticipate new product announcements throughout the year.In December,we introduced the latest in rada
10、r technology,the RTMS Sx-300 HDCAM.The combination of the state of the art Sx-300 and this new High Definition camera provides a one of a kind,all in one radar sensor for superior detection on roadways.The RTMS Sx-300 HDCAM allows the user the ability to verify the zone setup across all lanes and fa
11、cilitate real-time visual traffic surveillance anywhere,anytime.This high definition camera produces clear crisp images;and has dual streaming video channels.The Sx-300 provides the best lane detection capabilities available on the market and the accuracy needed to help keep the daily commute free o
12、f congestion.We continue to identify strategic partnerships around the world to help increase our global footprint.We believe this strategy will position us as the market leader.In North America,we have added additional radar product line partners in the western region of the country.In Europe,Middl
13、e East and Africa(EMEA)region,weve worked diligently to identify new partners and nurture the existing partnerships.We are continually reviewing our markets and partnerships and look to improve our market synergy.Looking AheadWe believe that the steps we took in 2015 have set the stage for enhanced
14、performance in 2016.As we continue to position Image Sensing Systems for sustained growth,we remain focused on:Maintaining profitability and positive cash flow;Investing in our new technology pipeline;and Creating the scale and leverage necessary to be successful in any business environment.Our comp
15、any continues to build an industry-leading reputation.As we look into 2016 and beyond,we are extremely excited about the future for Image Sensing Systems.We have some exciting new products that will be deployed throughout 2016.We remain persistent on being market and customer-led and have a renewed
16、energy and momentum to achieve these goals.We have gone back to our roots,the foundation on which our company was founded.I want to take this opportunity to thank our talented team of associates and our loyal customers and strategic partners.Together,we made enormous progress last year.We also want
17、to thank our shareholders for your continued support,as we take this journey together.We look forward to updating you on our progress.Sincerely,Dale ParkerInterim Chief Executive OfficerTo Our Shareholders:To Our Shareholders:We have passionate employees dedicated to developing innovative best in cl
18、ass products that will position us for sustained growth.UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549FORM 10-K(Mark one)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2015 or TRANSITION REPORT PURSUANT
19、TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For 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 incorporation or organization)(I.R.S.Em
20、ployer Identification No.)500 Spruce Tree Centre,1600 University Avenue West,St.Paul,MN 55104(Address of principal executive offices)(Zip Code)(651)603-7700(Registrants telephone number,including area code)Not applicable.(Former name,former address and former fiscal year,if changed since last report
21、)Securities registered pursuant to Section 12(b)of the Act:Title of each class Name of each exchange on which registered Common Stock,$0.01 par value The NASDAQ Capital Market Preferred Stock Purchase Rights The NASDAQ Capital Market Securities registered pursuant to Section 12(g)of the Act:None.Ind
22、icate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has file
23、d all reports required to be filed by Section 13 or Section 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 No Indic
24、ate 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 during the preceding 12 months(or for such shorter period that the registrant was r
25、equired to submit and post such files).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statements incorporated by referenc
26、e in Part III of this Form 10-K or any amendment to this Form 10-K.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 rep
27、orting company”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (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 Act).Y
28、es No As of June 30,2015,the aggregate market value of the registrants common stock held by non-affiliates of the registrant was$15,672,088 based on the closing sale price as reported on The NASDAQ Capital Market.The number of shares outstanding of the registrants$0.01 par value common stock as of F
29、ebruary 29,2016 was 5,028,000 shares.DOCUMENTS INCORPORATED BY REFERENCE Document Parts Into Which Incorporated Proxy Statement for the 2016 Annual Meeting of Shareholders(Proxy Statement)Part III i TABLE OF CONTENTS PART I.1 Item 1.Business.1 Item 1A.Risk Factors.7 Item 1B.Unresolved Staff Comments
30、.16 Item 2.Properties.16 Item 3.Legal Proceedings.16 Item 4.Mine Safety Disclosures.16 PART II.17 Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities.17 Item 6.Selected Financial Data.18 Item 7.Managements Discussion and Analysis of Finan
31、cial Condition and Results of Operations.19 Item 7A.Quantitative and Qualitative Disclosures About Market Risk.26 Item 8.Financial Statements and Supplementary Data.27 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.46 Item 9A.Controls and Procedures.46 It
32、em 9B.Other Information.46 PART III.47 Item 10.Directors,Executive Officers and Corporate Governance.47 Item 11.Executive Compensation.47 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.47 Item 13.Certain Relationships and Related Transactions,a
33、nd Director Independence.47 Item 14.Principal Accountant Fees and Services.47 PART IV.48 Item 15.Exhibits and Financial Statement Schedules.48 Signatures.52 Exhibit Index.53 1 PART I Item 1.Business General Image Sensing Systems,Inc.(referred to in this Annual Report on Form 10-K as“we,”“us,”“our”an
34、d the“Company”)develops and markets video and radar processing products for use in traffic,security,police and parking applications such as intersection control,highway,bridge and tunnel traffic management,venue security,entry control and traffic data collection.We are a leading provider of software
35、-based products and solutions for the intelligent transportation systems(“ITS”)industry.Our family of products,which we market as Autoscope video or video products(“AutoScope”),and RTMS radar or radar products(“RTMS”),provides end users with the tools needed to optimize traffic flow and enhance driv
36、er safety.Our technology analyzes signals from sophisticated sensors and transmits the information to management systems and controllers or directly to users.Our computer enabled detection(“CED”)software-based products provide end users with complete solutions for the intersection and transportation
37、 markets.Our technology is a process in which software rather than humans examines outputs from various types of sophisticated sensors to determine what is happening in a field of view.In the ITS industry,this process is a critical component of managing congestion and traffic flow.In many cities,it
38、is not possible to build roads,bridges and highways quickly enough to accommodate the increasing congestion levels.On average,United States commuters spend 42 hours a year stuck in traffic,and congestion costs motorists$160 billion a year.We believe this growing use of vehicles will make our ITS sol
39、utions increasingly necessary to complement existing and new roadway infrastructure to manage traffic flow and optimize throughput.We believe our solutions are technically superior to those of our competitors because they have a higher level of accuracy,limit the occurrence of false detection,are ge
40、nerally easier to install with lower costs of ownership,work effectively in a multitude of light and weather conditions,and provide end users the ability to manage inputs from a variety of sensors for a number of tasks.It is our view that the technical advantages of our products make our solutions w
41、ell suited for use in ITS as well as adjacent security and parking markets.We believe the strength of our distribution channels positions us to increase the penetration of our technology-driven solutions in the marketplace.We market our Autoscope video products in the United States,Mexico,Canada and
42、 the Caribbean through exclusive agreements with Econolite Control Products,Inc.(“Econolite”),which we believe is the leading distributor of ITS intersection control products in these markets.We market the RTMS radar systems to a network of distributors in North America,the Caribbean and Latin Ameri
43、ca.On a limited basis,we sell directly to the end user in these geographic areas.We market our Autoscope video and RTMS radar products outside of the United States,Mexico,Canada and the Caribbean through a combination of distribution and direct sales channels,including our wholly-owned subsidiaries
44、in the United Kingdom.Our end users primarily include governmental agencies and municipalities.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 w
45、holly-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 p
46、late 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.Industry Overview The Intelligent Transporta
47、tion Systems Market.ITS encompasses a broad range of information processing and control electronics technologies that,when integrated into roadway infrastructure,help monitor and manage traffic flow,reduce congestion and enhance driver safety.The ITS market has been built around the detection of con
48、ditions that impact the proper operation of roadway infrastructure.ITS applications include a wide array of traffic management systems,such as traffic signal control,tolling and variable messaging signs.ITS technologies include video vehicle detection,inductive loop detection,sensing technologies(su
49、ch as radar),floating cellular data,computational technologies and wireless communications.In traffic management applications,vehicle detection products are used for automated vehicle detection and are a primary data source upon which ITS solutions are built.Traditionally,automated vehicle detection
50、 is performed using inductive wire loops buried in the 2 pavement.However,in-pavement loop detectors are costly to install,difficult to maintain,expensive to repair and not capable of either wide-area vehicle detection without installations of multiple loops or recognizing license plate numbers.Abov
51、e-ground detection solutions for ITS offer several advantages to in-pavement loop detectors.Above-ground detection solutions tend to have a lower total cost of ownership than in-pavement loop detectors because above-ground solutions are non-destructive to road surfaces,do not require closing roadway
52、s to install or repair,and are capable of wide-area vehicle detection with a single device,thus enabling one input device to do the work of many in-pavement loops.Due to their location above-ground,these solutions have no exposure to the wear and tear associated with expanding and contracting paveme
53、nt and generally less exposure to the vibration and compaction caused by traffic.Furthermore,in the event of malfunction or product failure,above-ground detection solutions can be serviced and repaired without shutting down the roadway.Each of these factors results in greater up-time and increased r
54、eliability of above-ground detection solutions compared to in-pavement loop detectors.These technology solutions also offer a broader set of detection capabilities and a wider field of view than in-pavement loop detectors.In addition,a single unit video-or radar-based system can detect and measure a
55、 variety of parameters,including vehicle presence,counts,speed,length,time occupancy,headway and flow rate as well as environmental factors and obstructions to the roadway.An equivalent installation using loops would require many installations per lane.We believe our Autoscope video and RTMS radar p
56、roducts are competitive with and can take market share from in-pavement loop detectors.Based on our determination,the U.S.ITS above-ground detection market sales in 2014 were approximately$107 million,and the worldwide ITS above-ground detection market was approximately$215 million.We believe that w
57、e are the leader in the U.S.above-ground detection market in terms of sales volume,and we estimate that U.S.sales of in-pavement loop detectors that our Autoscope video and RTMS radar products can supplant were approximately$106 million in 2014.We believe that several trends are driving the growth i
58、n ITS and adjacent market segments:Proliferation of Traffic.In many countries,there has been a surge in the number of vehicles on roadways.Due to the growth of emerging economies and elevated standards of living,more people desire and are able to afford automobiles.The number of vehicles utilizing t
59、he worlds roadway infrastructure is growing at a quicker pace than new roads,bridges and highways are being constructed.The population of the United States grew by about 30%,or 75 million,from 1990 to 2014,while highway miles have increased by approximately 8%in the same period.Overall,the growth in
60、 roadway infrastructure is failing to match the surge in the number of vehicles using it.Above-ground detection based traffic management and control systems address the problem by monitoring high traffic areas and analyzing data that can be used to mitigate traffic problems.The Demographics of Urban
61、ization.Accelerated worldwide urbanization drives the creation and expansion of middle classes and produces heightened demand for automobiles.Currently,there are at least 400 cities in the world with over 1 million people.Because automobiles can be introduced to a metropolitan area faster than roadw
62、ay infrastructure can be constructed,the result is continuously worsening traffic.Expanding the roadway infrastructure is slow and costly to implement,and often environmentally undesirable,so government agencies are increasingly turning to technology-based congestion solutions that optimize performa
63、nce and throughput of existing and new roadway infrastructure.Detection is the requisite common denominator for any technology-based solution.The Melding of Large City Service Domains.Large cities require a wide range of service domains,including traffic.These cities are increasingly turning to cent
64、ralized management of these service domains,employing a command and control model that requires sharing and integrating data across service domains to operate effectively and lower total cost.For example,data collected for the traffic management service domain is relevant to all of the other service
65、 domains.This means that each sensor can supply information to multiple domain services.In turn,the sharing of detection information across service domains should increase the level of sophistication required to process and interpret that information.Additionally,above-ground detection products are
66、more capable of performing certain complicated tasks than humans.This makes the concepts of“rich sensing”and“instrumenting the city”through above-ground detection solutions cost effective,which we believe will result in the extensive proliferation of sophisticated sensors and detection devices.Solut
67、ions for Adjacent Markets.We believe that the adjacent markets of ITS,security/surveillance and parking management are converging,and that this convergence will accelerate as above-ground detection systems become more cost-effective now that a single sensor can be used for multiple purposes.Because
68、the technologies involved are closely related,our sensor technology can be adapted to or is already capable of addressing these adjacent markets.Our Competitive Strengths We are a leading provider of software-based detection products and solutions for the ITS industry.We have the following competiti
69、ve strengths that we expect will continue to enhance our leadership position:Leading Proprietary Technologies.Over the last two decades,we have developed or acquired a proprietary portfolio of complex software algorithms and applications that we have continuously enhanced and refined.These algorithm
70、s,which include our advanced signal processing technologies,allow our video and radar products to capture and analyze objects in diverse weather and lighting 3 conditions and to balance the accuracy of positive detection and the avoidance of false detections.Due to the strength of our proprietary te
71、chnologies,we believe we command premium pricing.Above-ground detection technologies similar to ours are also difficult to develop and refine in a commercially viable manner.We therefore should be well positioned to quickly introduce next-generation products to market.Proven Ability to Develop,Enhan
72、ce and Market New Products.We are continually developing and enhancing our product offerings.Over the last two decades,we have demonstrated our ability to lead the market with new products and product enhancements.For example,the Autoscope Solo system was the first fully integrated color camera,zoom
73、 lens and machine vision processor in the above-ground detection market.Our RTMS Radar business unit was one of the first to introduce radar-based technology solutions for ITS applications,and we continue to lead the market with technology enhancements and new products,such as RTMS radar.Furthermore
74、,our radar product,RTMS Sx-300,is an example of development driven by the voice of our customers.We have developed a high quality radar detection solution with increased reliability and longevity.We have successfully collaborated with our long-term channel partners to market these products.We believ
75、e that developing,enhancing and marketing new products with our partners can translate into strong organic revenue growth and high levels of profitability.Leading Distribution Channel.Since 1991,we have maintained a relationship with Econolite,which has the exclusive right to manufacture,market and
76、distribute our Autoscope video products in the United States,Mexico,Canada and the Caribbean.We believe that Econolite is the leading distributor of ITS control products in North America and the Caribbean.This relationship enhances our ability to commercialize and market new products and allows us t
77、o focus more resources on developing advanced signal processing software algorithms.Broad Product Portfolio.Our product portfolio leverages our core software-based algorithms to enable end users to detect and monitor objects in a designated field of view.We believe that our family of Autoscope video
78、 and RTMS radar products allows us to offer a broad product portfolio that meets the needs of our end users.Additionally,our intention is to use our broad product portfolio to offer hybrid products that satisfy traffic requirements.Experienced Management Team and Engineering Staff.Our management tea
79、m and engineering staff are highly experienced in the ITS and software industries.Additionally,the continuity of our engineering staff should allow the uninterrupted development of new or improved products.Our Growth Strategy As part of our growth strategy,we seek to:Enhance and Extend Our Technolog
80、y Leadership in ITS.We believe we have established ourselves as a leading provider of technology in the ITS market segment.We believe that we continue to have an opportunity to accelerate our growth.We plan to do this by improving the accuracy and functionality of our products and opportunistically
81、expanding our product offering into adjacent markets,as well as expanding our portfolio and channels through licensing.Having developed and introduced a hybrid product,we expect to take advantage of our technical leadership in ITS and further differentiate us from our competitors.Expand into Adjacen
82、t Markets.Our core skill is the implementation of software-based above-ground detection products and solutions.Over the past two decades,we have been developing and refining our complex signal processing software algorithms.We should be able to effectively utilize our core software skills more broad
83、ly as markets converge.We believe that a driver of this convergence is that above-ground detection systems will become more cost-effective when a single sensor can be used for multiple purposes.As a result,our objective is to become the leading supplier of critical detection components to third part
84、y management systems,particularly those that exploit the convergence of traffic.To do this,we are integrating this concept into our long-range engineering development road-map and will evaluate the use of technology licensing and channel strategies that support this vision.Increase the Scope of Our
85、Distribution and Direct Sales.We have made substantial investments in product adjustments to tailor our solutions to the differing needs of our international end users and in new product acquisitions for both domestic and international markets.We have also invested in sales and marketing expansion,w
86、ith a focus on our European subsidiaries.Markets in Eastern Europe,the Asia/Pacific region,the Middle East,Africa and South America,which have historically lagged North America and Western Europe in their use of above-ground detection,have recently begun to increase the adoption of detection technol
87、ogy in their traffic systems.We intend to continue to refine our product offerings through engineering development and technology licensing to take advantage of the accelerated pace of the adoption of above-ground detection throughout the developing world.Our Products and Solutions Our vehicle and t
88、raffic detection products are critical components of many ITS applications.Our Autoscope video systems and RTMS radar systems convert sensory input collected by video cameras and radar units into vehicle detection and traffic data used to operate,monitor and improve the efficiency of roadway infrast
89、ructure.At the core of each product line are proprietary digital signal processing 4 algorithms and sophisticated embedded software that analyze sensory input and deliver actionable data to integrated applications.We invested approximately$4.7 million,$4.9 million and$3.7 million on research and dev
90、elopment in 2015,2014 and 2013,respectively,to develop and enhance our product technology.Our digital signal processing software algorithms represent a foundation on which support for additional sensory inputs such as acoustic,chemical,smoke,weather and vibration sensors may be added in the future.A
91、 diagram displaying our fundamental product architecture is shown below.5 The Image Sensing Product Architecture Autoscope Video.Our Autoscope video system processes video input from a traffic scene in real time and extracts the required traffic data,including vehicle presence,bicycle presence/diffe
92、rentiation,counts,speed,length,time occupancy(percent of time the detection zone is occupied),average headway(time interval between vehicles)and flow rate(vehicles per hour per lane).Autoscope supports a variety of standard video cameras or can be purchased with an integrated video camera.For inters
93、ections,the system communicates with the intersection signal controller,which changes the traffic lights based on the data provided.In highway applications,the system gathers vehicle count and flow rates and detects anomalous incidents,such as stopped vehicles.In any application,the data may also be
94、 transmitted to a traffic management center via the internet or other standard communication means and processed in real time to assist in traffic management and stored for later analysis for traffic planning purposes.The Autoscope system comes in two varieties.Autoscope Encore is our integrated uni
95、t with a color zoom camera and a machine vision processing computer contained in a compact housing that is our leading offering in the North American market.Autoscope RackVision is our card only machine vision processing computer that is located in an intersection signal controller,control hub,incid
96、ent management center or traffic management center that receives video from a separate camera.The RackVision and its variants are our top selling Autoscope products in international markets.Autoscope products offer digital MPEG-4 video streaming,high speed Ethernet interface,web browser maintenance
97、and data and video over power line communications.RTMS Radar.Our RTMS radar systems use radar to measure vehicle presence,volume,occupancy,speed and classification information for roadway monitoring applications.Data is transmitted to a central computer at a traffic management center via standard co
98、mmunication means,including wireless.Data can be processed in real time to assist in traffic management and stored for later analysis for traffic planning purposes.RTMS radar is an integrated radar transmitter/receiver and special purpose computer contained in a compact,self-contained unit.The unit
99、is typically situated on roadway poles and side-fired,making it especially well-suited for highway detection applications.Distribution,Sales and Marketing We market and sell our products globally.Together with our partners,we offer a combination of high-performance detection technology and experienc
100、ed local support.Our end users primarily consist of federal,state,city and county departments of transportation,port,highway,tunnel and other transportation authorities,law enforcement agencies and parking facility operators.The decision-makers within these entities typically are traffic planners an
101、d engineers,who in turn often rely on consulting firms that perform planning and feasibility studies.Our products sometimes are sold directly to system integrators or other suppliers of systems and services who are operating under subcontracts in connection with major road construction contracts.Sal
102、es of Autoscope Video in the United States,Mexico,Canada and the Caribbean.We have granted Econolite an exclusive right to manufacture,market and distribute the Autoscope video system in the United States,Mexico,Canada and the Caribbean.The agreement with Econolite grants it a first refusal right th
103、at arises when we make a proposal to Econolite to extend the license to additional products 6 in the United States,Mexico,Canada and the Caribbean and a first negotiation right that arises when we make a proposal to Econolite to include rights corresponding to Econolites rights under our current agr
104、eements in countries not in these territories.Econolite provides the marketing and technical support needed for its sales in these territories.Econolite pays us a royalty on the revenue derived from its sales of the Autoscope system.We cooperate in marketing Autoscope video products with Econolite f
105、or the United States,Mexico,Canada and the Caribbean and provide second-tier technical support.We have the right to terminate our agreements with Econolite if it does not meet minimum annual sales levels or if Econolite fails to make payments as required by the agreements.In 2008,the term of the ori
106、ginal agreement with Econolite,as amended,was extended to 2031.The agreements can be terminated by either party upon three years notice.Sales of RTMS Radar in North America,the Caribbean and Latin America.We market the RTMS radar systems to a network of distributors covering countries in North Ameri
107、ca,the Caribbean and Latin America.On a limited basis,we sell directly to the end user.We provide technical support to these distributors from our various North American locations.Sales in Europe,Asia,the Middle East and Africa.We market our Autoscope video and RTMS radar product lines of products t
108、o a network of distributors covering countries in Europe,the Middle East,Africa and Asia through our wholly-owned subsidiaries that have offices in Europe.On a limited basis,we sell directly to the end user.Technical support to these distributors is provided by our wholly-owned subsidiaries in Europ
109、e,with second-tier support provided by our engineering groups.From time to time,we may grant exclusive rights to Econolite for markets outside of our significant markets for certain jurisdictions or product sales based on facts and circumstances related to the opportunities.Competition We compete wi
110、th companies that develop,manufacture and sell traffic management devices using video and radar sensing technologies as well as other above-ground detection technologies based on laser,infrared and acoustic sensors.For ITS applications,we also compete with providers of in-pavement loop detectors and
111、 estimate that more than 70%of the traffic management systems currently in use in the U.S.use in-pavement loop detectors.For competition with other above-ground detection products,we typically compete on performance and functionality,and to a lesser extent on price.When competing against providers o
112、f loop detectors,we compete principally on ease of installation and the total cost of ownership over a multi-year period,and to a lesser extent on functionality.Among the companies that provide direct competition to Autoscope video worldwide are FLIR Systems,Inc.,Signal Group Inc.(Semex),Iteris,Inc.
113、and Citilog S.A.Among the companies that provide direct competition to RTMS radar worldwide are Wavetronix,LLC,MS Sedco Inc.,Smartmicro Sensors GmbH and Xtralis,LLC.To our knowledge,Autoscope video and RTMS radar have the largest number of installations as compared to their direct competitors.In add
114、ition,there are smaller local companies providing direct competition in specific markets throughout the world.We are aware that these and other companies will continue to develop technologies for use in traffic management,security,police and parking applications.One or more of these technologies cou
115、ld in the future provide increased competition for our systems.Other potential competitors of which we are aware include Siemens AG,Cognex Corp.,Augusta Technologie AG,Matsushita Electric Industrial Co.,Ltd.(Panasonic),Sumitomo Corporation and Omron Electronics LLC.These companies have machine visio
116、n or radar capabilities and have substantially more financial,technological,marketing,personnel and research and development resources than we have.Manufacturing Autoscope video products for sale under the Econolite license agreement are manufactured through agreements with Econolite and Wireless Te
117、chnology,Inc.Econolite is responsible for setting warranty terms and must provide all service required under this warranty.In Europe and Asia,we engage contract manufacturers to manufacture the Autoscope family of products.Until July 24,2012,we engaged contract manufacturers to produce subassemblies
118、 for our radar products based on our designs.These subassemblies were then shipped to our facilities in Toronto,where we performed final assembly,testing and calibration and packaging of finished units for shipment.We also performed warranty and post-warranty repairs of radar units in Toronto.From J
119、uly 24,2012 until July 14,2014,our RTMS radar products were sold by Econolite in the United States,Mexico,Canada and the Caribbean.RTMS products sold under the Econolite license agreement were manufactured through agreements with Econolite and Wireless Technology,Inc.During this period,Econolite was
120、 responsible for setting warranty terms and service.In conjunction with the transition of RTMS sales to Econolite,we engaged Wireless Technology,Inc.to manufacture our radar products and perform warranty and post-warranty repairs of our radar units sold outside of North America.Effective July 14,201
121、4,marketing,manufacturing and distribution of the RTMS radar product line in the United States,Mexico,Canada and Caribbean transitioned from Econolite to the Company.As a result,we engage Wireless Technology,Inc.to manufacture our radar products and perform warranty and post-warranty repairs for all
122、 radar units sold.We typically provide a two to five year warranty on our products.7 Most of the hardware components used to manufacture our products are standard electronics components that are available from multiple sources.Although some of the components used in our products are obtained from si
123、ngle-source suppliers,we believe other component vendors are available should the necessity arise.The European Parliament has enacted a directive for the restriction of the use of certain hazardous substances in electrical and electronic equipment(“RoHS”).To our knowledge,our contract manufacturing
124、and component vendors in Europe and Asia comply with the European directive on RoHS.Intellectual Property To protect our rights to our proprietary know-how,technology and other intellectual property,it is our policy to require all employees and consultants to sign confidentiality agreements that pro
125、hibit the disclosure of confidential information to any third parties.These agreements also require disclosure and assignment to us of any discoveries and inventions made by employees and consultants while they are devoted to our business activities.We also rely on trade secret,copyright and tradema
126、rk laws to protect our intellectual property.We have also entered into exclusive and non-exclusive license and confidentiality agreements relating to our own and third-party technologies.We aggressively protect our processes,products,and strategies as proprietary trade secrets.Our efforts to protect
127、 intellectual property and avoid disputes over proprietary rights include ongoing review of third-party patents and patent applications.Environmental Matters We believe our operations are in compliance with all applicable environmental regulations within the jurisdictions in which we operate.Employe
128、es As of December 31,2015,we had 69 employees,consisting of 60 employees in North America,eight employees in Europe and one employee in Asia.None of our employees are represented by a union.Item 1A.Risk Factors Information Regarding Forward-Looking Statements This Annual Report on Form 10-K contains
129、 forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Securities Exchange of 1934,as amended.Forward-looking statements represent our expectations or beliefs concerning future events and can be identified by the use of forward-l
130、ooking words such as“believes,”“may,”“will,”“should,”“intends,”“plans,”“estimates,”or“anticipates”or other comparable terminology.Forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from the results discussed in the forward-looking
131、 statements.Some factors that might cause these differences include the factors listed below.Although we have attempted to list these factors comprehensively,we wish to caution investors that other factors may prove to be important in the future and may affect our operating results.New factors may e
132、merge from time to time,and it is not possible to predict all of these factors,nor can we assess the effect each factor or combination of factors may have on our business.We further caution you not to unduly rely on any forward-looking statements because they reflect our views only as of the date th
133、e statements were made.We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information,future events or otherwise.If governmental entities elect not to use our products due to budgetary constraints,project delays or other reasons,our reve
134、nue may fluctuate severely or be substantially diminished.Our products are sold primarily to governmental entities.We expect that we will continue to rely substantially on revenue and royalties from sales of our systems to governmental entities.In addition to normal business risks,it often takes con
135、siderable time before governmental initiated projects are developed to the point at which a purchase of our systems would be made,and a purchase of our products also may be subject to a time-consuming approval process.Additionally,governmental budgets and plans may change without warning.Other risks
136、 of selling to governmental entities include dependence on appropriations and administrative allocation of funds,changes in governmental procurement legislation and regulations and other policies that may reflect political developments,significant changes in contract scheduling,competitive bidding a
137、nd qualification requirements,performance bond requirements,intense competition for government business and termination of purchase decisions for the convenience of the governmental entity.Substantial delays in purchase decisions by governmental entities,or governmental budgetary constraints,could c
138、ause our revenue and income to drop substantially or to fluctuate significantly between fiscal periods.8 A majority of our gross profit has been generated from sales of our Autoscope family of products,and if we do not maintain the market for these products,our business will be harmed.Historically,a
139、 majority of our gross profit has been generated from sales of,or royalties from the sales of,Autoscope products.Gross profit from Autoscope sales accounted for approximately 78%of our gross profit in 2015,76%in 2014 and 86%in 2013.We anticipate that gross profit from the sale of Autoscope systems w
140、ill continue to account for a substantial portion of our gross profit for the foreseeable future.As such,any significant decline in sales of our Autoscope system would have a material adverse impact on our business,financial condition and results of operations.If Econolites sales volume decreases or
141、 if it fails to pay royalties to us in a timely manner or at all,our financial results will suffer.We have agreements with Econolite under which Econolite is the exclusive distributor of the Autoscope video system in the United States,Mexico,Canada and the Caribbean.From July 24,2012 until July 14,2
142、014,our RTMS radar products were sold by Econolite in these geographic areas under the same arrangement.Our current agreements grant Econolite a first refusal right that arises when we make a proposal to Econolite to extend the license to additional products in the United States,Mexico,Canada and th
143、e Caribbean.In addition,the agreements grant Econolite a first negotiation right that arises when we make a proposal to Econolite to include rights corresponding to Econolites rights under our current agreements in countries not in these territories.In exchange for its rights under the agreements,Ec
144、onolite pays us royalties for sales of the Autoscope video system and,from July 24,2012 until July 14,2014,the RTMS radar products.Since 2002,a substantial portion of our revenue has consisted of royalties resulting from sales made by Econolite,including 56%in 2015,57%in 2014 and 59%in 2013.Econolit
145、es account receivable represented 45%of our accounts receivable at December 31,2015 and 59%of our accounts receivable at December 31,2014.We expect that Econolite will continue to account for a significant portion of our revenue for the foreseeable future.Any decrease in Econolites sales volume coul
146、d significantly reduce our royalty revenue and adversely impact earnings.A failure by Econolite to make royalty payments to us in a timely manner or at all will harm our financial condition.In addition,we believe sales of our products are a material part of Econolites business,and any significant de
147、crease in Econolites sales of the other products it sells could harm Econolite,which could have a material adverse effect on our business and prospects.As a result of our continuing review of our business,we may have to undertake further restructuring plans that would require additional charges,incl
148、uding incurring facility exit and restructuring charges.We continue to evaluate our business,which may result in restructuring activities.We may choose to divest certain business operations based on managements assessment of their strategic value to our business,consolidate or close certain faciliti
149、es or outsource certain functions.Decisions to eliminate or limit certain business operations in the future could involve the expenditure of capital,consumption of management resources,realization of losses,transition and wind-up expenses,reduction in workforce,impairment of assets,facility consolid
150、ation and the elimination of revenues along with associated costs,any of which could cause our operating results to decline and may fail to yield the expected benefits.For more information regarding our restructuring and divestiture activities in 2015 and 2014,see the discussion in Note 2 and Note 1
151、3 of our Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.The features and functions in our products have not been as widely utilized as traditional products offered by our competitors,and the failure of our end users to accept the features and functio
152、ns in our products could adversely affect our business and growth prospects.Video and radar technologies have not been utilized in the traffic management industry as extensively as other more traditional technologies,mainly in-pavement loop detectors.Our financial success and growth prospects depend
153、 on the continued development of the market for advanced technology solutions for traffic detection and management and the acceptance of our current Autoscope video and RTMS radar and also future systems we may develop as reliable,cost-effective alternatives to traditional vehicle detection systems.
154、We cannot assure you that we will be able to utilize our technology profitably in other products or markets.If our end users do not continue to increase their acceptance of the features and functions provided by our current systems or other systems we may develop in the future,our business and growt
155、h prospects could be adversely affected.Our operating costs tend to be fixed,while our revenue tends to be seasonal,thereby resulting in operating results that fluctuate from quarter to quarter.Our expense levels are based in part on our product development efforts and our expectations regarding fut
156、ure revenues and,in the short-term,are generally fixed.Our quarterly revenues,however,have varied significantly in the past,with our first quarter historically being the weakest due to weather conditions in parts of North America,Europe and Asia that make roadway construction more difficult.Addition
157、ally,our international revenues have a significant large project component,resulting in a varying revenue stream.We expect the seasonality of our revenue and the fixed nature of our operating costs to continue in the foreseeable future.Therefore,we may be unable to adjust our spending in a timely ma
158、nner to compensate for any unexpected revenue shortfall.As a result,if anticipated revenues in any quarter do not occur or are delayed,our operating results for the quarter would be disproportionately affected.Operating results 9 also may fluctuate due to factors such as the demand for our products;
159、product life cycle;the development,introduction and acceptance of new products and product enhancements by us or our competitors;changes in the mix of distribution channels through which our products are offered;changes in the level of operating expenses;end user order deferrals in anticipation of n
160、ew products;competitive conditions in the industry;and economic conditions generally.No assurance can be given that we will be able to achieve or maintain profitability on a quarterly or annual basis in the future.Increased competition may make it difficult for us to acquire and retain end users.If
161、we are unsuccessful in developing new applications and product enhancements,our products may become noncompetitive or obsolete.Competition in ITS is continuing to grow.Some of the companies that may compete with us in the business of developing and implementing traffic control and related security s
162、ystems have substantially more financial,technological,marketing,personnel and research and development resources than we have.Therefore,they may be able to respond more quickly than we can to new or changing opportunities,technologies,standards or end user requirements.If we are unable to compete s
163、uccessfully with these companies,the market share for our products will decrease,and competitive pressures may seriously harm our business.Additionally,the market for vehicle detection is continuously seeking more advanced technological solutions to problems.Technologies such as embedded loop detect
164、ors,pressure plates,pneumatic tubes,radars,lasers,magnetometers,acoustics and microwaves that have been used as traffic sensing devices in the past are being enhanced for use in the traffic management industry,and new technologies may be developed.We are aware of several companies that are developin
165、g traffic management devices using machine vision technology or other advanced technology.Floating vehicle and/or radio frequency identification(RFID)tagged license plate initiatives are under consideration and may be implemented.We expect to face increasingly competitive product developments,applic
166、ations and enhancements.New technologies or applications in traffic control systems from other companies or the development of new and emerging technologies and applications,including vehicle-to-vehicle(VTV)communications,mobile applications,and new algorithms or sensor technologies,may provide our
167、end users with alternatives to our products and could render our solutions noncompetitive or obsolete.If we are unable to increase the number of our applications and develop and commercialize product enhancements and applications in a timely and cost-effective manner that respond to changing technol
168、ogy and satisfy the needs of our end users,our business and financial results will suffer.We may not achieve our growth plans for the expansion of our business.In addition to market penetration,our long-term success depends on our ability to expand our business through new product development,merger
169、s and acquisitions,and/or geographic expansion.New product development requires that we maintain our ability to improve existing products,continue to bring innovative products to market in a timely fashion,and adapt products to the needs and standards of current and potential customers.Our products
170、and services may become less competitive or eclipsed by technologies to which we do not have access or which render our solutions obsolete.Geographic expansion will be primarily outside of the U.S.and hence will be disproportionately subject to the risks of international operations discussed in this
171、 Annual Report on Form 10-K.Mergers and acquisitions will be accompanied by risks which may include:difficulties identifying suitable acquisition candidates at acceptable costs;unavailability of capital to conduct acquisitions;failure to achieve the financial and strategic goals for the acquired and
172、 combined businesses;difficulty assimilating the operations and personnel of the acquired businesses;disruption of ongoing business and distraction of management from the ongoing business;dilution of existing shareholders and earnings per share;unanticipated,undisclosed or inaccurately assessed liab
173、ilities,legal risks and costs;and difficulties retaining our key vendors,customers or employees or those of the acquired business.In addition,acquisitions of businesses having a significant presence outside the U.S.will increase our exposure to the risks of international operations discussed in this
174、 Annual Report on Form 10-K.Our dependence on third parties for manufacturing and marketing our products may prevent us from meeting customers needs in a timely manner.We do not have,and do not intend to develop in the near future,internal capabilities to manufacture our products.We have entered int
175、o agreements with Econolite and Wireless Technology,Inc.(“WTI”)to manufacture the Autoscope system,the RTMS radar products and related products for sales in the United States,Mexico,Canada and the Caribbean.We work with suppliers,most of whom are overseas,10 to manufacture the rest of our products.W
176、e also need to comply with the European Unions regulatory RoHS directive restricting the use of certain hazardous substances in electrical and electronic equipment.If Econolite,WTI,or our other suppliers are unable to manufacture our products in the future,we may be unable to identify other manufact
177、urers able to meet product and quality demands in a timely manner or at all.Our inability to find suitable manufacturers for our products could result in delays or reductions in product shipments,which in turn may harm our business reputation and results of operations.In addition,we have granted Eco
178、nolite the exclusive right to market the Autoscope video system and related products in the United States,Mexico,Canada and the Caribbean.Consequently,our revenue depends to a significant extent on Econolites marketing efforts.Econolites inability to effectively market the Autoscope video system,or
179、the disruption or termination of that relationship,could result in reduced revenue and market share for our products.We and our third party manufacturers obtain some of the components of our products from a single source,and an interruption in the supply of those components may prevent us from meeti
180、ng customers needs in a timely manner and could therefore reduce our sales.Although substantially all of the hardware components incorporated into our products are standard electronics components that are available from multiple sources,we and our third party manufacturers obtain some of the compone
181、nts from a single source.The loss or interruption of any of these supply sources could force us or our manufacturers to identify new suppliers,which could increase our costs,reduce our sales and profitability,or harm our customer relations by delaying product deliveries.Regulations related to the us
182、e of conflict-free minerals may increase our costs and cause us to incur additional expenses.The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve the transparency and accountability of the use by public companies in their products of minerals mined in certain
183、countries and to prevent the sourcing of such“conflict”minerals.As a result,the Securities and Exchange Commission enacted annual disclosure and reporting requirements for public companies who use these minerals in their products,which apply to us.Under the final rules,we are required to conduct due
184、 diligence to determine the source of any conflict minerals used in our products.We filed our first conflict minerals report on Form SD with the Securities and Exchange Commission May 29,2014,and we are required to file our next conflict minerals report on or before June 1,2015.Although we expect to
185、 file the required report on a timely basis,our supply chain is broad-based and complex,and we may not be able to easily verify the origins for all minerals used in our products.To the extent that any information furnished to us by our suppliers is inaccurate or inadequate,we could face reputational
186、 and enforcement risks.In addition,the conflict mineral rules could reduce the number of suppliers who provide components and products containing conflict-free minerals and thus could disrupt our supply chain or that of our manufacturers and increase the cost of the components used in manufacturing
187、our products and the costs of our products to us.Any increased costs and expenses could have a material adverse impact on our financial condition and results of operations.Some of our products are covered by our warranties and,if the cost of fulfilling these warranties exceeds our warranty allowance
188、,it could adversely affect our financial condition and results of operations.Unanticipated warranty and other costs for defective products could adversely affect our financial condition and results of operations and our reputation.We generally provide a two to five year warranty on our product sales
189、.These warranties require us to repair or replace faulty products,among other customary warranty provisions.Although we monitor our warranty claims and provide an allowance for estimated warranty costs,unanticipated claims in excess of the allowance could have a material adverse impact on our financ
190、ial condition and results of operations.Additionally,we rely on our third party manufacturers to fulfill our warranty repair obligations to our customers.Adverse changes in these parties abilities to perform these repairs could cause a delay in repairs or require us to source other parties to perfor
191、m the repairs and could adversely affect impact our financial condition and results of operations.In addition,the need to repair or replace products with design or manufacturing defects could adversely affect our reputation.We may face increased competition if we fail to adequately protect our intel
192、lectual property rights,and any efforts to protect our intellectual property rights may result in costly litigation.Our success depends in large measure on the protection of our proprietary technology rights.We rely on trade secret,copyright and trademark laws,confidentiality agreements with employe
193、es and third parties,and patents,all of which offer only limited protection.We cannot assure you that the scope of these protective measures will exclude competitors or provide competitive advantages to us.We also cannot assure you that we will become aware of all instances in which others develop s
194、imilar products,duplicate any of our products,or reverse engineer or misappropriate our proprietary technology.If our proprietary technology is misappropriated,our business and financial results could be adversely affected.Litigation may be necessary in the future to enforce our intellectual propert
195、y rights,to protect our trade secrets or to determine the validity and scope of the proprietary rights of others.In addition,we may be the subject of lawsuits by others who claim we violate their intellectual property rights.Intellectual property litigation is very costly and could result in substan
196、tial expense and diversions of our resources,either of which could adversely affect our business and financial condition and results of operations.In addition,there may be no effective legal recourse 11 against infringement of our intellectual property by third parties,whether due to limitations on
197、enforcement of rights in foreign jurisdictions or as a result of other factors.We have not applied for patent protection in all countries in which we market and sell our products.Consequently,our proprietary rights in the technology underlying our systems in countries other than the U.S.will be prot
198、ected only to the extent that trade secret,copyright or other non-patent protection is available and to the extent we are able to enforce our rights.The laws of other countries in which we market our products may afford little or no effective protection of our proprietary technology,which could harm
199、 our business.We plan to continue introducing new products and technologies and may not realize the degree or timing of benefits we initially anticipated,which could adversely affect our business and results of operations.We regularly invest substantial amounts in research and development efforts th
200、at pursue advancements in a range of technologies,products and services.Our ability to realize the anticipated benefits of these advancements depends on a variety of factors,including meeting development,production,certification and regulatory approval schedules;the execution of internal and externa
201、l performance plans;the availability of supplier-produced parts and materials;the performance of suppliers and vendors;achieving cost efficiencies;the validation of innovative technologies;and the level of end user interest in new technologies and products.These factors involve significant risks and
202、 uncertainties.We may encounter difficulties in developing and producing these new products and may not realize the degree or timing of benefits initially anticipated.In particular,we cannot predict with certainty whether,when or in what quantities our current or potential end users will have a dema
203、nd for products currently in development or pending release.Moreover,as new products are announced,sales of current products may decrease as end users delay making purchases until such new products are available.Any of the foregoing could adversely affect our business and results of operations.Our b
204、usiness could be adversely affected by product liability and commercial litigation.Our products or services may be claimed to cause or contribute to personal injury or property damage to our customers employees or facilities.Additionally,we are,at times,involved in commercial disputes with third par
205、ties,such as customers,distributors,vendors and others.The ensuing claims may arise singularly,in groups of related claims,or in class actions involving multiple claimants.Such claims and litigation are frequently expensive and time-consuming to resolve and may result in substantial liability to us,
206、which liability and related costs and expenses may not be recoverable through insurance or any other forms of reimbursement.Our business could be affected by various legal and regulatory compliance risks,including those involving antitrust,environmental,anti-bribery or anti-corruption laws and regul
207、ations.We are subject to various legal and regulatory requirements and risks in the U.S.and other countries in which we have facilities or sell our products involving compliance with antitrust,environmental,anti-bribery and anti-corruption laws and regulations,including the U.S.Foreign Corrupt Pract
208、ices Act and the U.K.Anti-Bribery Act.Although we have internal policies and procedures with the intention of assuring compliance with these laws and regulations,our employees,contractors,agents and licensees involved in our international sales may take actions in violation of such policies.For more
209、 information,see the discussion in Note 16 of our Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.Any future adverse development,ruling or settlement could result in charges that could have an adverse effect on our results of operations or cash flows
210、.We price certain of our products at a premium compared to other technologies.As such,we may not be able to quickly respond to emerging low-cost competitors,and our inability to do so could adversely affect revenue and profitability.We price certain of our products at a premium as compared to produc
211、ts using less sophisticated technologies.As the technological sophistication of our competitors and the size of the market increase,competing low-cost developers of machine vision products for traffic are likely to emerge and grow stronger.If end users prefer low-cost alternatives over our products,
212、our revenue and profitability could be adversely affected.Our revenue could be adversely affected by the emergence of local competitors and local biases in international markets.Our experience indicates that local officials that purchase traffic management products in the international markets we se
213、rve favor products that are developed and manufactured locally.As local competitors to our products emerge,local biases could erode our revenue in Europe and Asia and adversely affect our sales and revenue in those markets.Our failure to predict technological convergence could harm our business and
214、could reduce our sales.Within our product families,we currently utilize only certain detection technologies available in the ITS field.If we fail to predict convergence of technology preferences in the market for ITS,or fail to identify and acquire complementary businesses or products that broaden o
215、ur current product offerings,we may not capture certain segments of the market,which could harm our business and reduce our sales.12 We sell our products internationally and are subject to various risks relating to such international activities,which could harm our international sales and profitabil
216、ity.Sales outside of the United States,including export sales from our U.S.business locations,accounted for approximately 17%of our total revenue in 2015 and 29%of our total revenue in 2014.By doing business in international markets,we are exposed to risks separate and distinct from those we face in
217、 our U.S.operations.Our international business may be adversely affected by changing political and economic conditions in foreign countries.Additionally,fluctuations in currency exchange rates could affect demand for our products or otherwise negatively affect profitability.Engaging in international
218、 business inherently involves a number of other difficulties and risks,including:export restrictions and controls relating to technology;pricing pressure that we may experience internationally;exposure to the risk of currency value fluctuations,where payment for products is denominated in a currency
219、 other than U.S.dollars;variability in the U.S.dollar value of foreign currency-denominated assets,earnings and cash flows;required compliance with existing and new foreign regulatory requirements and laws;laws and business practices favoring local companies;longer payment cycles;difficulty of enfor
220、cing agreements,including patent and trademarks,and collecting receivables through foreign legal systems;disputes with parties outside of the U.S.,which may be more difficult,expensive and time-consuming to resolve than disputes with parties located in the U.S.;political and economic instability,inc
221、luding volatility in the economic environment of the European Union caused by the ongoing sovereign debt crisis in Europe;tax rates in certain foreign countries that exceed those in the U.S.and the imposition of withholding requirements on foreign earnings;higher danger of terrorist activity,war or
222、civil unrest compared to domestic operations;difficulties and costs of staffing and managing foreign operations;and difficulties in enforcing intellectual property rights.Our exposure to each of these risks may increase our costs,lengthen our sales cycle and require significant management attention.
223、One or more of these factors may harm our business.Our inability to comply with European and Asian regulatory restrictions over hazardous substances and electronic waste could restrict product sales in those markets and reduce profitability in the future.The European Unions Waste Electrical and Elec
224、tronic Equipment(“WEEE”)directive makes producers of electrical goods financially responsible for specified collection,recycling,treatment and disposal of past and future covered products.This directive must be enacted and implemented by individual European Union governments,and certain producers wi
225、ll be financially responsible under the WEEE legislation.This may impose requirements on us,which,if we are unable to meet them,could adversely affect our ability to market our products in European Union countries,and our sales revenues and profitability would suffer as a consequence.In addition,the
226、 European Parliament has enacted a directive for the restriction of the use of certain hazardous substances in electrical and electronic equipment.This RoHS legislation restricts the use of such substances as mercury,lead,cadmium and hexavalent cadmium.If we are unable to have our products manufactu
227、red in compliance with the RoHS directive,we would be unable to market our products in European Union countries,and our revenues and profitability would suffer.In addition,various Asian governments could adopt their own versions of environment-friendly electronic regulations similar to the European
228、directives,RoHS and WEEE.This could require new and 13 unanticipated manufacturing changes,product testing and certification requirements,thereby increasing cost,delaying sales and lowering revenue and profitability.Our inability to manage growth effectively could seriously harm our business.Growth
229、and expansion of our business could significantly strain our capital resources as well as the time and abilities of our management personnel.Our ability to manage growth effectively will require continued improvement of our operational,financial and management systems and the successful training,mot
230、ivation and management of our employees.If we are unable to manage growth successfully,our business and operating results will suffer.Our business operations will be severely disrupted if we lose key personnel or if we fail to attract and retain qualified personnel.Our technology depends upon the kn
231、owledge,experience and skills of our key management and scientific and technical personnel.Additionally,our ability to continue technological developments and to market our products,and thereby develop a competitive edge in the marketplace,depends in large part on our ability to attract and retain q
232、ualified scientific and technical personnel.Competition for qualified personnel is intense,and we cannot assure you that we will be able to attract and retain the individuals we need,especially if our business expands and requires us to employ additional personnel.In addition,the loss of personnel o
233、r our failure to hire additional personnel could materially and adversely affect our business,operating results and ability to expand.The loss of key personnel,or our inability to hire and retain qualified personnel,would harm our business.We may not be successful in integrating any acquired compani
234、es into our business,which could materially and adversely affect our financial condition and operating results.Part of our business strategy has been to acquire or invest in companies,products or technologies that complement our current products,enhance our market coverage or technical capabilities
235、or offer growth opportunities.For any acquisition,a significant amount of managements time and financial resources may be required to complete the acquisition and integrate the acquired business into our existing operations.Even with this investment of management time and financial resources,an acqu
236、isition may not produce the revenue,earnings or business synergies anticipated.Acquisitions involve numerous other risks,including the assumption of unanticipated operating problems or legal liabilities;problems integrating the purchased operations,technologies or products;the diversion of managemen
237、ts attention from our core businesses;restrictions on the manner in which we may use purchased companies or assets imposed by acquisition agreements;adverse effects on existing business relationships with suppliers and customers;incorrect estimates made in the accounting for acquisitions and amortiz
238、ation of acquired intangible assets that would reduce future reported earnings(such as goodwill impairments);ensuring acquired companies compliance with the requirements of the U.S.federal securities laws and accounting rules;and the potential loss of customers or key employees of acquired businesse
239、s.We cannot assure you that any acquisitions,investments,strategic alliances or joint ventures will be completed or integrated in a timely manner or achieve anticipated synergies,will be structured or financed in a way that will enhance our business or creditworthiness,or will meet our strategic obj
240、ectives or otherwise be successful.We may be required to recognize impairment charges for long-lived assets.As of December 31,2015,the net carrying value of long-lived assets(property and equipment,deferred tax assets and other intangible assets)totaled approximately$1.7 million.In accordance with U
241、.S.generally accepted accounting principles,we periodically assess these assets to determine if they are impaired.Significant negative industry or economic trends,a significant and sustained decline in our stock price,disruptions to our businesses,significant unexpected or planned changes in our use
242、 of assets,divestitures and market capitalization declines may result in impairments to our goodwill and other long-lived assets.Future impairment charges could significantly affect our results of operations in the periods recognized.Our stock is thinly traded and our stock price is volatile.Our com
243、mon stock is thinly traded,with 4,559,952 shares of our 5,028,000 outstanding shares held by non-affiliates as of February 29,2016.Based on the trading history of our common stock and the nature of the market for publicly traded securities of companies in evolving high-tech industries,we believe the
244、re are several factors that have caused and are likely to continue to cause the market price of our common stock to fluctuate substantially.The fluctuations may occur on a day-to-day basis or over a longer period of time.Factors that may cause fluctuations in our stock price include announcements of
245、 large orders obtained by us or our competitors,substantial cutbacks in government funding of highway projects or of the potential availability of alternative technologies for use in traffic control and safety,quarterly fluctuations in our financial results or the financial results of our competitor
246、s,consolidation among our competitors,fluctuations in stock market prices and volumes,and the volatility of the stock market.14 Difficult and volatile conditions in the capital,credit and commodities markets and in the overall economy could continue to adversely affect our financial position,results
247、 of operations and cash flows,and we do not know if these conditions will improve in the near future.Our financial position,results of operations and cash flows could continue to be adversely affected by difficult conditions and significant volatility in the capital,credit and commodities markets an
248、d in the overall worldwide economy.Although certain economic conditions in the United States have improved,economic growth has been slow and uneven and may not be sustained.During economic downturns,governmental entities in particular,which constitute most of our end users,reduce or delay their purc
249、hase of our products,which has had and may continue to have an adverse effect on our business.Any uncertainty about the federal budget in the U.S.could have a negative effect on the U.S.and global economy.The continuing impact that these factors might have on us and our business is uncertain and can
250、not be estimated at this time.Current economic conditions have accentuated each of these risks and magnified their potential effect on us and our business.The difficult conditions in these markets and the overall economy affect our business in a number of ways.For example:Although we believe we have
251、 sufficient liquidity under our financing arrangements to run our business,under extreme market conditions,there can be no assurance that such funds would be available or sufficient,and,in such a case,we may not be able to successfully obtain additional financing on favorable terms,or at all.Continu
252、ing market volatility has exerted downward pressure on our stock price,which could make it more difficult or unfavorable for us to raise additional capital in the future.Economic conditions could result in customers in our markets continuing to experience financial difficulties,including limited liq
253、uidity and their inability to obtain financing or electing to limit spending because of the economy which may result,for example,in customers inability to pay us at all or on a timely basis and in declining tax revenue for our customers that are governmental entities,which in turn could result in de
254、creased sales and earnings for us.We do not know if market conditions or the state of the overall economy will improve in the near future,when improvement will occur or if any improvement will benefit our market segment.Our articles of incorporation and bylaws,Minnesota law and our shareholder right
255、s plan may inhibit a takeover that shareholders consider favorable.Provisions of our articles of incorporation and bylaws and applicable provisions of Minnesota law may delay or discourage transactions involving an actual or potential change in our control or change in our management,including trans
256、actions in which shareholders might otherwise receive a premium for their shares or transactions that our shareholders might otherwise deem to be in their best interests.These provisions:permit our board of directors to issue up to 5,000,000 shares of preferred stock with any rights,preferences and
257、privileges as it may designate,including the right to approve an acquisition or other change in our control;provide that the authorized number of directors may be increased by resolution of the board of directors;provide that all vacancies,including newly-created directorships,may,except as otherwis
258、e required by law,be filled by the affirmative vote of a majority of directors then in office,even if less than a quorum;and eliminate cumulative voting rights,therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the
259、 directors standing for election,if they should so choose.Section 302A.671 of the Minnesota Business Corporation Act(“MBCA”)generally limits the voting rights of a shareholder acquiring a substantial percentage of our voting shares in an attempted takeover or otherwise becoming a substantial shareho
260、lder of our company unless holders of a majority of the voting power of all outstanding shares and the disinterested shares approve full voting rights for the substantial shareholder.Section 302A.673 of the MBCA generally limits our ability to engage in any business combination with certain persons
261、who own 10%or more of our outstanding voting stock or any of our associates or affiliates who at any time in the past four years have owned 10%or more of our outstanding voting stock.These provisions of the MBCA may have the effect of entrenching our management team and may deprive shareholders of t
262、he opportunity to sell their shares to potential acquirers at a premium over prevailing prices.This potential inability to obtain a control premium could reduce the price of our common stock.In addition,in June 2013,we adopted a shareholder rights plan and declared a dividend to our shareholders of
263、one preferred share purchase right for each outstanding share of common stock.Generally,the shareholder rights plan provides that if a person or group acquires 20%or more of our outstanding shares of common stock,subject to certain exceptions and under certain circumstances,the rights may be exchang
264、ed by us for common stock or the holders of the rights,other than the acquiring person or group,could acquire 15 additional shares of our capital stock at a discount of the then current market price.Such exchanges or exercise of rights could cause substantial dilution to a particular acquirer and di
265、scourage the acquirer from pursuing our company.The mere existence of a shareholder rights plan often delays or makes a merger,tender offer or other acquisition more difficult to complete.We can issue shares of preferred stock without shareholder approval,which could adversely affect the rights of c
266、ommon shareholders.Our articles of incorporation permit our board of directors to establish the rights,privileges,preferences and restrictions,including voting rights,of future series of our preferred stock and to issue such stock without approval from our shareholders.The rights of holders of our c
267、ommon stock may suffer as a result of the rights granted to holders of preferred stock that may be issued in the future.In addition,we could issue preferred stock to prevent a change in control of our Company,depriving common shareholders of an opportunity to sell their stock at a price in excess of
268、 the prevailing market price.We do not intend to declare cash dividends on our stock in the foreseeable future.We currently intend to retain all future earnings for the operation and expansion of our business and,therefore,do not anticipate declaring or paying cash dividends on our common stock in t
269、he foreseeable future.Any payment of cash dividends on our common stock will be at the discretion of our board of directors and will depend upon our operating results,earnings,current and anticipated cash needs,capital requirements,financial condition,future prospects,any contractual restrictions an
270、d any other factors deemed relevant by our board of directors.Therefore,shareholders should not expect to receive dividend income from shares of our common stock.16 Item 1B.Unresolved Staff Comments None.Item 2.Properties We currently lease and occupy approximately 26,775 square feet in St.Paul,Minn
271、esota for our headquarters.In February 2014,we entered into an amendment to the lease for our headquarters which expanded the leased space from approximately 20,000 square feet to approximately 26,775 square feet,extended the term of the lease to July 2020,and gave us the right to further extend the
272、 term of the lease for one additional five year term.We also lease smaller facilities in Canada,Germany,Spain and Romania.We believe that our current space is generally adequate to meet our current expected needs,and we do not intend to lease significantly more space in 2016.Item 3.Legal Proceedings
273、 We are involved in legal actions and claims relating to various matters.Although we are unable to predict the ultimate outcome of these legal actions and claims,it is the opinion of management that the disposition of these matters,taken as a whole,will not have a material adverse effect on our Cons
274、olidated Financial Statements.Item 4.Mine Safety Disclosures Not applicable.17 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The NASDAQ Capital Market under the symbol“ISNS.”T
275、he quarterly high and low sales prices for our common stock for our last two fiscal years are set forth below.QuarterHighLowHighLowFirst2.78$2.24$5.99$4.74$Second3.47 2.44 5.37 3.16 Third4.66 3.38 9.94 2.10 Fourth3.99 3.55 4.13 1.89 20152014 Shareholders As of February 29,2016,there were 20 holders
276、of record of our common stock.The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares in“street names”or persons,partnerships,associates,corporations,or other entities identified in security position listings maintaine
277、d by depositories.Dividends We have never declared or paid a cash dividend on our common stock.We currently intend to retain earnings for use in the operation and expansion of our business,and,consequently,we do not anticipate paying any dividends in the foreseeable future.Debt Covenants Our credit
278、agreement includes certain financial covenants,including minimum debt service ratios,minimum cash flow coverage ratios,and other financial measures.These financial covenants may restrict our ability to pay dividends and purchase outstanding shares of common stock.At December 31,2015 and December 31,
279、2014,we were in compliance with these financial covenants.Information on our debt agreements is included in Item 7 of this Annual Report on Form 10-K.18 Item 6.Selected Financial Data The following table sets forth selected consolidated financial data for each of the three fiscal years ended Decembe
280、r 31,2015.The statement of income data for the years ended and as of December 31,2015,2014 and 2013 are derived from our audited Consolidated Financial Statements.The following information should be read in conjunction with“Managements Discussion and Analysis of Financial Condition and Results of Op
281、erations”and with our Consolidated Financial Statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.Consolidated Statement of Operations Data:Revenue:Product sales$6,729$7,896$8,244 Royalties8,486 10,247 11,598 15,215 18,143 19,842 Cost of revenue:Product sale
282、s3,477 4,583 6,421 3,477 4,583 6,421 Gross profit11,738 13,560 13,421 Operating expenses:Selling,marketing and product support3,216 5,093 8,370 General and administrative4,048 4,299 4,571 Research and development3,520 4,862 3,710 Amortization of intangible assets 455 488 488 Restructuring119 770 Inv
283、estigation matter 152 3,723 Impairment of investment 150 11,358 15,814 20,862 Operating income(loss)from continuing operations380 (2,254)(7,441)Other,net21 65 6 Income(loss)from continuing operations before income taxes401 (2,189)(7,435)Income tax expense(benefit)18 (154)3,995 Net income(loss)from c
284、ontinuing operations383 (2,035)(11,430)Net loss from discontinued operations,net of tax(including 2015 loss on disposal of$1,081)(3,485)(7,668)(4,471)Net loss$(3,102)$(9,703)$(15,901)Net income(loss)per share:Basic Continuing operations$0.08$(0.41)$(2.31)Discontinued operations$(0.70)$(1.54)$(0.90)N
285、et basic earnings per share$(0.62)$(1.95)$(3.21)Diluted Continuing operations$0.08$(0.41)$(2.31)Discontinued operations$(0.69)$(1.54)$(0.90)Net diluted earnings per share$(0.61)$(1.95)$(3.21)Weighted average number of common shares outstanding:Basic5,011 4,983 4,955 Diluted5,019 4,983 4,955 (in thou
286、sands,except per share data)201520142013 19 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Selected Financial Data and our Co
287、nsolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion as a result of certain
288、 factors,including,but not limited to,those discussed in“Risk Factors”included elsewhere in this Annual Report on Form 10-K.General.The Company previously conducted its operations through three business segments consisting of 1)Intersection,2)Highway,and 3)LPR.As further described in Note 2 of our N
289、otes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K,on July 9,2015,the Company completed the sale of its LPR segment.As a result,effective July 9,2015,the LPR business qualified for discontinued operations presentation in the Companys consolidated financi
290、al statements.Accordingly,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.As a result,all amounts presented in the accompanying Con
291、solidated Financial Statements and Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on From 10-K reflect the financial results and financial position of the Companys continuing intersection and highway businesses,other than consolidated amounts reflecting operatin
292、g results and balances for discontinued operations.The following discussion of year-to-year trends in financial statement results under“Managements Discussion and Analysis of Financial Condition and Results of Operations”aligns with the financial statement presentation described above.We provide sof
293、tware based computer enabled detection(“CED”)products and solutions that use advanced signal processing software algorithms to detect and monitor objects in a designated field of view.Our technology analyzes signals from a sophisticated sensor and passes the information along to management systems,c
294、ontrollers or directly to users.Our core products,the Autoscope Video Vehicle Detection System and RTMS Radar Detection System,operate using our proprietary application software in conjunction with video cameras or radar and commonly available electronic components.Our systems are used by traffic ma
295、nagers primarily to improve the flow of vehicle traffic and to enhance safety at intersections,main thoroughfares,freeways and tunnels.Autoscope video systems are sold to distributors and end users of traffic management products in the United States,Mexico,Canada and the Caribbean by Econolite Contr
296、ol Products,Inc.(“Econolite”),our exclusive licensee in these regions.We sell all of our systems to distributors and end users in Europe and Asia through our subsidiaries.The majority of our sales are to end users that are funded by government agencies responsible for traffic management.RTMS Radar B
297、usiness Model Change.From July 24,2012 until July 14,2014,our RTMS radar systems also were sold by Econolite in the United States,Mexico,Canada and the Caribbean under the same arrangement as Econolite sold our Autoscope video systems.Effective July 14,2014,the marketing,manufacturing and distributi
298、on of the RTMS radar product line in these regions transitioned from Econolite to the Company.Trends and Challenges in Our Business We believe the expected growth in our business can be attributed primarily to the following global trends:worsening traffic caused by increased numbers of vehicles in m
299、etropolitan areas without corresponding expansions of road infrastructure and the need to automate safety,security and access applications for automobiles and trucks,which has increased demand for our products;advances in information technology,which have made our products easier to market and imple
300、ment;the continued funding allocations for centralized traffic management services and automated enforcement schemes,which have increased the ability of our primary end users to implement our products;and general increases in the cost-effectiveness of electronics,which make our products more afforda
301、ble for end users.We believe our continued growth primarily depends upon:continued adoption and governmental funding of intelligent transportation systems(“ITS”)and other automated applications for traffic control,safety and enforcement in developed countries;a propensity by traffic engineers to imp
302、lement lower cost technology-based solutions rather than civil engineering solutions such as widening roadways;20 countries in the developing world adopting above-ground detection technology,such as video or radar,instead of in-pavement loop technology to manage traffic;the use of CED to provide sol
303、utions to surveillance and environmental issues associated with increasing automobile use in metropolitan areas;and our ability to develop new products,such as hybrid CED devices incorporating,for example,radar and video technologies,that provide increasingly accurate information and enhance the end
304、 users ability to cost-effectively manage traffic and environmental issues.Because the majority of our end users are governmental entities,we are faced with challenges related to potential delays in purchase decisions by those entities and changes in budgetary constraints.These contingencies could r
305、esult in significant fluctuations in our revenue between periods.The ongoing economic environment in Europe and the United States is further adding to the unpredictability of purchase decisions,creating more delays than usual and decreasing governmental budgets,and it is likely to continue to affect
306、 our revenue.Key Financial Terms and Metrics Revenue.We derive revenue from two sources:(1)royalties received from Econolite for sales of the Autoscope video and RTMS radar(from 2012 until July 14,2014)systems in the United States,Mexico,Canada and the Caribbean and(2)revenue received from the direc
307、t sales of our RTMS radar systems(after July 14,2014)in the United States,Mexico,Canada and the Caribbean and all of our systems in Europe and Asia.On July 14,2014,we announced the transfer of North American marketing and manufacturing of the RTMS radar product line from Econolite to Image Sensing S
308、ystems,ending our royalty agreement for radar sales.Autoscope video royalties are calculated using a profit sharing model where the gross profits on sales of product made through Econolite are shared equally with Econolite.This royalty arrangement has the benefit of decreasing our cost of revenues a
309、nd our selling,marketing and product support expenses because these costs and expenses are borne primarily by Econolite.Although this royalty model has a positive impact on our gross margin,it also negatively impacts our total revenue,which would be higher if all the sales made by Econolite were mad
310、e directly by us.The royalty arrangement is exclusive under a long-term agreement.Cost of Revenue.There is no cost of revenue related to royalties,as virtually all manufacturing,warranty and related costs are incurred by Econolite.Cost of revenue related to product sales consists primarily of the am
311、ount charged by our third party contractors to manufacture hardware platforms,which is influenced mainly by the cost of electronic components.The cost of revenue also includes logistics costs,estimated expenses for product warranties,restructuring costs and inventory reserves.The key metric that we
312、follow is achieving certain gross margin percentages on product sales by geographic region and to a lesser extent by product line.Operating Expenses.Our operating expenses fall into three categories:(1)selling,marketing and product support;(2)general and administrative;and(3)research and development
313、.Selling,marketing and product support expenses consist of various costs related to sales and support of our products,including salaries,benefits and commissions paid to our personnel;commissions paid to third parties;travel,trade show and advertising costs;second-tier technical support for Econolit
314、e;and general product support,where applicable.General and administrative expenses consist of certain corporate and administrative functions that support the development and sales of our products and provide an infrastructure to support future growth.These expenses include management,supervisory and
315、 staff salaries and benefits,legal and auditing fees,travel,rent and costs associated with being a public company,such as board of director fees,listing fees and annual reporting expenses.Research and development expenses consist mainly of salaries and benefits for our engineers and third party cost
316、s for consulting and prototyping.We measure all operating expenses against our annually approved budget,which is developed with achieving a certain operating margin as a key focus.Also included in operating expenses are restructuring costs and non-cash expense for intangible asset amortization.Non-G
317、AAP Operating Measure.We provide certain non-GAAP financial information as supplemental information to financial measures calculated and presented in accordance with GAAP(Generally Accepted Accounting Principles in the United States).This non-GAAP information excludes the impact of amortizing intang
318、ible assets and may exclude other non-recurring items.Management believes that this presentation facilitates the comparison of our current operating results to historical operating results.Management uses this non-GAAP information to evaluate short-term and long-term operating trends in our core ope
319、rations.Non-GAAP information is not prepared in accordance with GAAP and should not be considered a substitute for or an alternative to GAAP financial measures and may not be computed the same as similarly titled measures used by other companies.21 The table below reconciles non-GAAP income(loss)fro
320、m continuing operations,which is a non-GAAP financial measure,to comparable GAAP financial measures:Income(loss)from continuing operations$380$(2,254)$(7,441)Adjustments to reconcile to non-GAAP net lossAmortization of intangible assets455 488 488 Depreciation298 413 530 Restructuring119 770 Investi
321、gation matter 152 3,723 Impairment 150 Non-GAAP net income(loss)from continuing operations$1,252$(281)$(2,700)201520142013Year Ended December 31,Seasonality.Our quarterly revenues and operating results have varied significantly in the past due to the seasonality of our business.Our first quarter gen
322、erally is the weakest due to weather conditions that make roadway construction more difficult in parts of North America,Europe and northern Asia.We expect such seasonality to continue for the foreseeable future.Additionally,our international revenues regularly contain individually significant sales.
323、This can result in significant variations of revenue between periods.Accordingly,we believe that quarter-to-quarter comparisons of our financial results should not be relied upon as an indication of our future performance.No assurance can be given that we will be able to achieve or maintain profitab
324、ility on a quarterly or annual basis in the future.Segments.We currently operate in 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 pr
325、oduct sales.Video products are normally sold in the Intersection segment.The RTMS radar is our radar product line,and revenue consists of sales to external customers.Radar products are normally sold in the Highway segment.As a result of business model changes and modifications in how we manage our b
326、usiness,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):Revenue$10,198$5,017$15,215 Gross profit9,128 2,610 11,738 Amortization of intangible assets 455 455 Intangible as
327、sets1,210 1,210 Revenue$11,357$6,786$18,143 Gross profit10,305 3,255 13,560 Amortization of intangible assets 488 488 Intangible assets 454 454 Revenue$13,428$6,414$19,842 Gross profit11,559 1,862 13,421 Amortization of intangible assets 488 488 Intangible assets 942 942 IntersectionHighwayTotalFor
328、the year ended December 31,2015IntersectionHighwayTotalFor the year ended December 31,2014IntersectionHighwayTotalFor the year ended December 31,2013 22 Results of Operations The following table sets forth,for the periods indicated,certain consolidated statements of operations data as a percent of t
329、otal revenue and gross profit on product sales and royalties as a percentage of international sales and royalties,respectively.201520142013Product sales44.2%43.5%41.5%Royalties55.8 56.5 58.5 Total revenue100.0 100.0 100.0 Gross profit-product sales48.3 42.0 22.1 Gross profit-royalties100.0 100.0 100
330、.0 Selling,marketing and product support21.1 28.1 42.2 General and administrative26.6 23.7 23.0 Research and development23.1 26.8 18.7 Amortization of intangible assets 3.0 2.7 2.5 Restructuring0.8 4.2 Investigation matter 0.8 18.8 Impairment 0.8 Income(loss)from continuing operations2.5 (12.4)(37.5
331、)Income tax expense(benefit)0.1 (0.8)20.1 Net income(loss)from continuing operations2.5 (11.2)(57.6)Year Ended December 31,Year Ended December 31,2015 Compared to Year Ended December 31,2014.Total revenue decreased to$15.2 million in 2015 from$18.1 million in 2014,a decrease of 16.1%.In the first qu
332、arter of 2015,we completed a restructuring plan to close our office in Asia.Excluding Asia revenue of$1.9 million in 2014,revenue for 2015 decreased$1.0 million,a decrease of 6.0%.Royalty income decreased to$8.5 million in 2015 from$10.2 million in 2014,a decrease of 17.2%.The decrease in royalties
333、was the result of a decrease in Autoscope video system sales under the Econolite agreement and the transition of RTMS radar product sales from Econolite to the Company in 2014.Prior to the transfer of domestic radar sales and marketing activities from Econolite to the Company in July 2014,we received radar royalties of approximately$709,000 in 2014.Autoscope video royalties were lower in the fisca
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