Autoscope Technologies (AATC) 10-Q 10 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 30, 2017
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Entity Registrant Name	IMAGE SENSING SYSTEMS INC
Entity Central Index Key	943,034
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,147,916
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 2,120	$ 1,547
Accounts receivable, net of allowance for doubtful accounts of $72 and $90 respectively	2,812	3,011
Inventories	224	141
Prepaid expenses and other current assets	290	281
Total current assets	5,446	4,980
Property and equipment:
Furniture and fixtures	487	486
Leasehold improvements	426	426
Equipment	3,612	3,561
[PropertyPlantAndEquipmentGross]	4,525	4,473
Accumulated depreciation	4,173	4,102
[PropertyPlantAndEquipmentNet]	352	371
Intangible assets, net	2,879	2,795
Deferred income taxes	58	58
TOTAL ASSETS	8,735	8,204
Current liabilities:
Accounts payable	641	256
Warranty	1,124	1,223
Accrued compensation	239	193
Other current liabilities	250	323
Total current liabilities	2,254	1,995
Deferred tax liabilities	1
TOTAL LIABILITIES	2,255	1,995
Shareholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued or outstanding	0	0
Common stock, $.01 par value; 20,000,000 shares authorized, 5,147,916 and 5,094,473 issued and outstanding at March 31, 2017 and December 31, 2016, respectively.	51	50
Additional paid-in capital	24,120	24,055
Accumulated other comprehensive loss	(356)	(363)
Accumulated deficit	(17,335)	(17,533)
Total shareholders' equity	6,480	6,209
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 8,735	$ 8,204

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 72	$ 90
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	20,000,000	20,000,000
Common stock shares issued	5,148,000	5,094,000
Common stock shares outstanding	5,148,000	5,094,000

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenue:
Product sales	$ 1,440	$ 1,614
Royalties	1,644	1,624
Total Revenue:	3,084	3,238
Cost of revenue:
Product sales	544	918
Software amortization	90	0
Total Cost of revenue:	634	918
Gross profit	2,450	2,320
Operating expenses:
Selling, general and administrative	1,436	1,689
Research and development	816	794
Restructuring	0	126
Total Operating expenses:	2,252	2,609
Operating income (loss) from operations	198	(289)
Other, net	3	(1)
Income (loss) from operations before income taxes	201	(290)
Income tax expense	4	2
Net income (loss)	$ 197	$ (292)
Net income (loss) per share:
Net basic earnings (loss) per share	$ 0.04	$ (0.06)
Net diluted earnings (loss) per share	$ 0.04	$ (0.06)
Weighted average number of common shares outstanding:
Weighted average common shares oustanding	5,096	5,030
Shares used in diluted net income (loss) per common share calculations	5,096	5,030

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Net income (loss)	$ 197	$ (292)
Other comprehensive income (loss):
Foreign currency translation adjustment	7	1
Comprehensive loss	$ 204	$ (291)

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating activities:
Net income (loss)	$ 197	$ (292)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation	65	75
Software amortization	90	0
Stock-based compensation	65	59
Changes in operating assets and liabilities:
Accounts receivable, net	199	544
Inventories	(83)	272
Prepaid expenses and other current assets	(10)	(36)
Accounts payable	297	(705)
Accrued expenses and other current liabilities	(126)	(534)
Net cash provided by (used for) operating activities	694	(617)
Investing activities:
Capitalized software development costs	(95)	(601)
Purchases of property and equipment	(33)	(24)
Net cash used for investing activities	(128)	(625)
Effect of exchange rate changes on cash	7	(3)
Increase (decrease) in cash and cash equivalents	573	(1,245)
Cash and cash equivalents at beginning of period	1,547	2,648
Cash and cash equivalents at end of period	2,120	1,403
Non-Cash investing and financing activities:
Purchase of Property and Equipment in accounts payable	11	0
Capitalization of software development costs in accounts payable	$ 79	$ 0

Basis of Presentation

Basis of Presentation	3 Months Ended
	Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Note A: Basis of Presentation Image Sensing Systems, Inc. (referred to in this Quarterly Report on Form 10-Q as "we," "us," "our" and the "Company") develops and markets video and radar processing products for use in applications such as intersection control, highway, bridge and tunnel traffic management and traffic data collection. We sell our products primarily to distributors and also receive royalties under a license agreement with a manufacturer/distributor for certain of our products. Our products are used primarily by governmental entities. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q, which require the Company to make estimates and assumptions that affect amounts reported. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. It is the opinion of management that the unaudited condensed consolidated financial statements include all adjustments consisting of normal recurring accruals considered necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated. Operating results for the three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 as filed with the SEC. Summary of Significant Accounting Policies The Company believes that of its significant accounting policies, the following are particularly important to the portrayal of the Company's results of operations and financial position and may require the application of a higher level of judgment by the Company's management and, as a result, are subject to an inherent degree of uncertainty. Revenue Recognition We recognize revenue on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer have occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled. Certain sales may contain multiple elements for revenue recognition purposes. We consider each deliverable that provides value to the customer on a standalone basis as a separable element. Separable elements in these arrangements may include the hardware, software, installation services, training and support. We initially allocate consideration to each separable element using the relative selling price method. Selling prices are determined by us based on either vendor-specific objective evidence ("VSOE") (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, our best estimate of the selling price. Factors considered by us in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by us to provide the deliverable, as well as our historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training may not be considered separable. Under those circumstances, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer. Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts. Econolite Control Products, Inc. (Econolite) is our licensee that sells certain of our products in the United States, Mexico, Canada and the Caribbean. The royalty of approximately 50% of the gross profit on licensed products is recognized when the products are shipped or delivered by Econolite to its customers. We record provisions against sales revenue for estimated returns and allowances in the period when the related revenue is recorded based on historical sales returns and changes in end user demand. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Inventories Inventories are primarily electronic components and finished goods and are valued at the lower of cost or market on the first-in, first-out accounting method. Income Taxes We record a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. We believe it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management's expectations could have a material impact on our financial condition and operating results. We recognize penalties and interest expense related to unrecognized tax benefits in income tax expense. Intangible Assets We capitalize certain software development costs related to software to be sold, leased, or otherwise marketed. Capitalized software development costs include purchased materials, services, internal labor and other costs associated with the development of new products and services. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. Based on our product development process, technological feasibility is generally established once product and detailed program designs have been completed, uncertainties related to high-risk development issues have been resolved through coding and testing, and we have established that the necessary skills, hardware, and software technology are available for production of the product. Once a software product is available for general release to the public, capitalized development costs associated with that product will begin to be amortized to cost of sales over the product's estimated economic life, using the greater of straight-line or a method that results in cost recognition in future periods that is consistent with the anticipated timing of product revenue recognition. Capitalized software development costs are subject to an ongoing assessment of recoverability, which is impacted by estimates and assumptions of future revenues and expenses for these software products, as well as other factors such as changes in product technologies. Any portion of unamortized capitalized software development costs that are determined to be in excess of net realizable value have been expensed in the period in which such a determination is made. We reached technological feasibility for certain software products and, as a result, capitalized approximately $174,000 and $601,000 of software development costs during the quarters ended March 31, 2017 and 2016, respectively. Intangible assets with finite lives are amortized on a straight‑line basis over the expected period to be benefited by future cash flows and reviewed for impairment. At both March 31, 2017 and December 31, 2016, we determined there was no impairment of intangible assets. At both March 31, 2017 and 2016, there were no indefinite‑lived intangible assets.

Recent Accounting Pronouncement

Recent Accounting Pronouncements	3 Months Ended
	Mar. 31, 2017
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Recent Accounting Pronouncements	Note B: Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, “Compensation-Stock Compensation (Topic 718)." ASU 2016-09 provides new guidance on how an entity should account for stock compensation. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company adopted ASU 2016-09 effective January 1, 2017 and the adoption did not have a material impact to the consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." ASU 2016-02 provides new guidance on how an entity should account for leases and recognize associated lease assets and liabilities. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The new guidance must be adopted using a modified retrospective transition, and it provides for certain practical expedients. In addition, the transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently determining our implementation approach and assessing the impact of ASU 2016-02 on the consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 provides guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 specifies accounting for costs associated with obtaining or fulfilling contracts with customers and expands the required disclosures related to revenue and cash flows from contracts with customers. On July 9, 2015, the FASB affirmed its proposal to defer the effective date of ASU 2014-09 for all entities by one year. As a result, public business entities, certain not-for-profit entities, and certain employee benefit plans will apply this new revenue standard to annual reporting periods beginning after December 15, 2017. All other entities will apply this new revenue standard to annual reporting periods beginning after December 15, 2018. Additionally, the FASB affirmed its proposal to permit all entities to apply ASU 2014-09 early, but not before the original effective date for public business entities, certain not-for-profit entities, and certain employee benefit plans (that is, annual periods beginning after December 15, 2016). Entities choosing to implement early will apply ASU 2014-09 to all interim reporting periods within the year of adoption. The Company is currently determining its implementation approach and assessing the impact of ASU 2014-09 on the consolidated financial statements.

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2017
Fair Value Disclosures [Abstract]
Fair Value Measurements	Note C: Fair Value Measurements The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for measuring fair value and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs as follows: Level 1 - observable inputs such as quoted prices in active markets; Level 2 - inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3 - unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis Our intangible assets and other long-lived assets are nonfinancial assets that were acquired either as part of a business combination, individually or with a group of other assets. These nonfinancial assets were initially, and have historically been, measured and recognized at amounts equal to the fair value determined as of the date of acquisition. Financial Instruments not Measured at Fair Value Certain of our financial instruments are not measured at fair value and are recorded at carrying amounts approximating fair value, based on their short-term nature or variable interest rate. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and other current financial assets and liabilities.

Inventories

Inventories	3 Months Ended
	Mar. 31, 2017
Inventories [Abstract]
Inventories	Note D: Inventories Inventories consisted of approximately $224,000 and $141,000 of finished goods as of March 31, 2017 and December 31, 2016, respectively.

Intangible Assets

Intangible Assets	3 Months Ended
	Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible Assets	Note E: Intangible Assets Intangible assets consisted of the following (dollars in thousands): March 31, 2017 Weighted Gross Net Average Carrying Accumulated Carrying Useful Life Amount Amortization Value (in Years) Developed technology $ 3,900 (3,900) $ - - Vision development costs 2,885 (180) 2,705 8.0 Software development costs 174 - 174 - Total $ 6,959 $ (4,080) $ 2,879 8.0 December 31, 2016 Weighted Gross Net Average Carrying Accumulated Carrying Useful Life Amount Amortization Value (in Years) Developed technology $ 3,900 $ (3,900) $ - - Vision development costs 2,885 (90) 2,795 8.0 $ 6,785 $ (3,990) $ 2,795 8.0

Credit Facilities

Credit Facilities	3 Months Ended
	Mar. 31, 2017
Debt Disclosure [Abstract]
Credit Facilities	Note F: Credit Facilities In May 2014, the Company entered into a credit agreement and related documents with Alliance Bank providing for a revolving line of credit for the Company. The credit agreement and related documents with Alliance Bank (collectively, the "Alliance Credit Agreement") provides up to a $5.0 million revolving line of credit. Amounts due under the Alliance Credit Agreement bear interest at a fixed annual rate of 3.95%. Any advances are secured by the Company's inventories, accounts receivable, cash, marketable securities, and equipment. We are subject to certain covenants under the Alliance Credit Agreement. In April 2016, we entered into an agreement with Alliance Bank amending the Alliance Credit Agreement to extend the maturity date from April 1, 2016 to May 12, 2017. At March 31, 2017, we had no borrowings under the Alliance Credit Agreement, and we were in compliance with all financial covenants. As of March 31, 2017, available borrowings were $1.7 million, and we do not anticipate renewing the line of credit

Warranties

Warranties	3 Months Ended
	Mar. 31, 2017
Product Warranties Disclosures [Abstract]
Warranties	Note G: Warranties We generally provide a two to five year warranty on product sales. Reserves to honor warranty claims are estimated and recorded at the time of sale based on historical claim information and are analyzed and adjusted periodically based on claim trends. Warranty liability and related activity consisted of the following (in thousands): Three-Month Periods Ended 2017 2016 Beginning balance $ 1,223 $ 760 Warranty provisions 10 71 Warranty claims (60) (95) Adjustments to preexisting warranties (51) 24 Currency 2 - Ending balance $ 1,124 $ 760

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	Note H: Stock-Based Compensation We compensate officers, directors, key employees and consultants with stock-based compensation under stock option and incentive plans approved by our shareholders and administered under the supervision of our Board of Directors. Stock option awards are granted at exercise prices equal to the closing price of our stock on the day before the date of grant. Generally, options vest proportionally over periods of three to five years from the dates of the grant, beginning one year from the date of grant, and have a contractual term of nine to ten years. Performance stock options are time based; however, the final number of awards earned and the related compensation expense is adjusted up or down to the extent the performance target is met. The actual number of shares that will ultimately vest ranges from 90% to 100% of the targeted amount if the minimum performance target is achieved. We evaluate the likelihood of meeting the performance target at each reporting period and adjust compensation expense, on a cumulative basis, based on the expected achievement of each performance target. Compensation expense, net of estimated forfeitures, is recognized ratably over the vesting period. Stock-based compensation expense included in general and administrative expense for the three-month periods ended March 31, 2017 and 2016 was $65,000 and $59,000, respectively. At March 31, 2017, 253,445 shares were available for grant under the Company's stock option and incentive plan. Stock Options A summary of the option activity for the first three months of 2017 is as follows: Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Options outstanding at December 31, 2016 132,500 $ 6.15 4.50 $ - Granted - - - - Exercised - - - - Expired - - - - Forfeited (22,000) 5.72 - - Options outstanding at March 31, 2017 110,500 $ 6.24 4.00 $ - Options exercisable at March 31, 2017 92,000 $ 6.56 3.38 $ - There were no options exercised during the three month periods ended March 31, 2017 and March 31, 2016. As of March 31, 2017, there was $23,000 of total unrecognized compensation cost related to non-vested stock options. The weighted average period over which the compensation cost is expected to be recognized is one year. Restricted Stock Awards and Stock Awards Restricted stock awards are granted under the Plan at the discretion of the Compensation Committee of our Board of Directors. We issue restricted stock awards to executive officers and key consultants. These awards may contain certain performance conditions or time-based vesting criteria. Executive officers vest in the restricted stock awards if the various performance or time-based metrics are met. Stock-based compensation is recognized for the number of awards expected to vest at the end of the period and is expensed beginning on the grant date through the end of the vesting period. At time of vesting, the recipients of common stock may request to receive a net of the number of shares required for employee withholding taxes, which can be withheld up to the relevant jurisdiction's maximum statutory rate. Stock awards to consultants are recognized over the performance period based on the stock price on the date when the consultant's performance is complete. We also issue stock awards as a portion of the annual retainer for each director on a quarterly basis. The stock awards are fully vested at the time of issuance. Compensation expense related to stock awards is determined on the grant date based on the publicly quoted fair market value of our common stock and is charged to earnings on the grant date. A summary of the restricted stock awards and stock award activity for the first three months of 2017 is as follows: Number of Shares Weighted Average Grant Date Fair Value Awards outstanding December 31, 2016 - $ - Granted 53,443 2.93 Exercised (21,443) 2.90 Expired - - Forfeited - - Awards outstanding at March 31, 2017 32,000 $ 2.95 As of March 31, 2017, the total stock-based compensation expense related to non-vested awards not yet recognized was $74,000, which is expected to be recognized over a weighted average period of 2.95 years. The weighted average grant date fair value of restricted stock units granted during the three-month period ended March 31, 2017 was $2.95. We granted restricted stock awards of 53,443 shares during the three-month period ended March 31, 2016. During the three-month periods ended March 31, 2017 and March 31, 2016, we recognized $63,000 and $29,000, respectively, of stock-based compensation expense related to restricted stock awards.

Income (Loss) per Common Share

Income (Loss) per Common Share	3 Months Ended
	Mar. 31, 2017
Income (Loss) per Common Share [Abstract]
Income (Loss) per Common Share	Note I: Income (Loss) per Common Share Net income (loss) per share is computed by dividing net income (loss) by the daily weighted average number of common shares outstanding during the applicable periods. Diluted net income (loss) per share includes the potentially dilutive effect of common shares subject to outstanding stock options using the treasury stock method. Under the treasury stock method, shares subject to certain outstanding stock options have been excluded from the diluted weighted average shares outstanding calculation because the exercise of those options would lead to a net reduction in common shares outstanding. As a result, stock options to acquire 125,222 and 278,500 weighted common shares have been excluded from the diluted weighted shares outstanding for the three-month periods ended March 31, 2017 and 2016, respectively. A reconciliation of net income (loss) per share is as follows (dollar amounts in thousands except per share data): Three-Month Periods Ended 2017 2016 Numerator: Net income (loss) $ 197 $ (292) Denominator: Weighted average common shares outstanding 5,096 5,030 Dilutive potential common shares - - Shares used in diluted net loss per common share calculations 5,096 5,030 Basic net income (loss) per common share $ 0.04 $ (0.06) Diluted net income (loss) per common share $ 0.04 $ (0.06)

Segment Information

Segment Information	3 Months Ended
	Mar. 31, 2017
Segment Reporting [Abstract]
Segment Information	Note J: Segment Information The Company's Chief Executive Officer and management regularly review financial information for the Company's discrete operating segments. Based on similarities in the economic characteristics, nature of products and services, production processes, type or class of customer served, method of distribution and regulatory environments, the operating segments have been aggregated for financial statement purposes and categorized into two reportable segments: Intersection and Highway. Autoscope video is our machine-vision product line, and revenue consists of royalties (all of which are received from Econolite), as well as a portion of international product sales. Video products are normally sold in the Intersection segment. RTMS is our radar product line, and revenue consists of international and North American product sales. Radar products are normally sold in the Highway segment. All segment revenues are derived from external customers. Operating expenses and total assets are not allocated to the segments for internal reporting purposes. Due to the changes in how we manage our business, we may reevaluate our segment definitions in the future. The following tables set forth selected unaudited financial information for each of our reportable segments (in thousands): Three Months Ended March 31, Intersection Highway Total 2017 2016 2017 2016 2017 2016 Revenue $ 1,904 $ 1,904 $ 1,180 $ 1,334 $ 3,084 $ 3,238 Gross profit 1,735 1,718 715 602 2,450 2,320 Amortization of intangible assets 90 - - - 90 - Intangible assets 2,772 1,811 107 - 2,879 1,811

Restructuring and Exit Activiti

Restructuring and Exit Activities	3 Months Ended
	Mar. 31, 2017
Restructuring Charges [Abstract]
Restructuring	Note K: Restructuring and Exit Activities In the first quarter of 2016, the Company implemented restructuring plans in Canada. Because of these actions, restructuring charges of approximately $126,000 were recorded in the first three months of 2016 related to employee terminations. The following table shows the restructuring activity for the three months ended March 31, 2016 (in thousands): Facility Costs Termination and Contract Benefits Termination Total Balance at January 1, 2016 $ - $ - $ - Charges 126 - 126 Payments/settlements - - - Balance at March 31, 2016 $ 126 $ - $ 126 No restructuring charges were recorded in the three months ended March 31, 2017.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Note L: Commitments and Contingencies Litigation We are involved from time to time in various legal proceedings arising in the ordinary course of our business, including primarily commercial, product liability, employment and intellectual property claims. In accordance with generally accepted accounting principles in the United States, we record a liability in our Consolidated Financial Statements with respect to any of these matters when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. With respect to currently pending legal proceedings, we have not established an estimated range of reasonably possible additional losses either because we believe that we have valid defenses to claims asserted against us or the proceeding has not advanced to a stage of discovery that would enable us to establish an estimate. We currently do not expect the outcome of these matters to have a material effect on our consolidated results of operations, financial position or cash flows. Litigation, however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against us could adversely impact our results of operations, financial position or cash flows. We expense legal costs as incurred. On May 5, 2016, Econolite, our exclusive North American manufacturer and distributor, served a complaint on us for a lawsuit filed by Econolite in the Superior Court of the State of California for the County of Orange. The complaint asserted claims against us under the Manufacturing, Distributing and Technology License Agreement, as amended, with Econolite (the "Econolite Agreement") for breach of contract and breach of implied covenant of good faith and fair dealing and sought specific performance related to the transition of North American RTMS sales and marketing activities from Econolite to us in July 2014. In the complaint, Econolite requested damages from us in an amount to be proven at trial and sought certain other remedies. On May 27, 2016, we removed the case to the Federal District Court, District of Central California. On November 15, 2016, Econolite and the Company entered into an Arbitration Agreement. On November 16, 2016, Econolite voluntarily dismissed all of its claims against the Company in the U.S. District Court but filed a demand for arbitration with JAMS (which is an alternative dispute resolution provider), asserting the same claims against the Company that it had asserted in the lawsuit. Arbitration commenced on November 16, 2016, and it remains ongoing. We believe that Econolite's claims are without merit, and we plan to vigorously defend against them. However, we cannot predict the outcome of this matter at this time or whether it will have a material adverse impact on our business prospects, financial condition, operating results or cash flow.

Significant Accounting Policies

Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Revenue Recognition	Revenue Recognition We recognize revenue on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer have occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled. Certain sales may contain multiple elements for revenue recognition purposes. We consider each deliverable that provides value to the customer on a standalone basis as a separable element. Separable elements in these arrangements may include the hardware, software, installation services, training and support. We initially allocate consideration to each separable element using the relative selling price method. Selling prices are determined by us based on either vendor‑specific objective evidence (“VSOE”) (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, our best estimate of the selling price. Factors considered by us in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by us to provide the deliverable, as well as our historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training may not be considered separable. Under those circumstances, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer. Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts. Econolite Control Products, Inc. (Econolite) is our licensee that sells certain of our products in the United States, Mexico, Canada and the Caribbean. The royalty of approximately 50% of the gross profit on licensed products is recognized when the products are shipped or delivered by Econolite to its customers. We record provisions against sales revenue for estimated returns and allowances in the period when the related revenue is recorded based on historical sales returns and changes in end user demand. Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority.
Inventories	Inventories Inventories are primarily electronic components and finished goods and are valued at the lower of cost or market on the first-in, first-out accounting method.
Income Taxes	Income Taxes We record a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. We believe it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management's expectations could have a material impact on our financial condition and operating results. We recognize penalties and interest expense related to unrecognized tax benefits in income tax expense.
Intangible Assets	Intangible Assets We capitalize certain software development costs related to software to be sold, leased, or otherwise marketed. Capitalized software development costs include purchased materials, services, internal labor and other costs associated with the development of new products and services. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. Based on our product development process, technological feasibility is generally established once product and detailed program designs have been completed, uncertainties related to high-risk development issues have been resolved through coding and testing, and we have established that the necessary skills, hardware, and software technology are available for production of the product. Once a software product is available for general release to the public, capitalized development costs associated with that product will begin to be amortized to cost of sales over the product's estimated economic life, using the greater of straight-line or a method that results in cost recognition in future periods that is consistent with the anticipated timing of product revenue recognition. Capitalized software development costs are subject to an ongoing assessment of recoverability, which is impacted by estimates and assumptions of future revenues and expenses for these software products, as well as other factors such as changes in product technologies. Any portion of unamortized capitalized software development costs that are determined to be in excess of net realizable value have been expensed in the period in which such a determination is made. We reached technological feasibility for certain software products and, as a result, capitalized approximately $174,000 and $601,000 of software development costs during the quarters ended March 31, 2017 and 2016, respectively. Intangible assets with finite lives are amortized on a straight‑line basis over the expected period to be benefited by future cash flows and reviewed for impairment. At both March 31, 2017 and December 31, 2016, we determined there was no impairment of intangible assets. At both March 31, 2017 and 2016, there were no indefinite‑lived intangible assets.

Intangible Assets (Tables)

Intangible Assets (Tables)	3 Months Ended
	Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of intangible assets	Intangible assets consisted of the following (dollars in thousands): March 31, 2017 Weighted Gross Net Average Carrying Accumulated Carrying Useful Life Amount Amortization Value (in Years) Developed technology $ 3,900 (3,900) $ - - Vision development costs 2,885 (180) 2,705 8.0 Software development costs 174 - 174 - Total $ 6,959 $ (4,080) $ 2,879 8.0 December 31, 2016 Weighted Gross Net Average Carrying Accumulated Carrying Useful Life Amount Amortization Value (in Years) Developed technology $ 3,900 $ (3,900) $ - - Vision development costs 2,885 (90) 2,795 8.0 $ 6,785 $ (3,990) $ 2,795 8.0

WARRANTIES (Tables)

WARRANTIES (Tables)	3 Months Ended
	Mar. 31, 2017
Product Warranties Disclosures [Abstract]
Warranty liability and related activity	Warranty liability and related activity consisted of the following (in thousands): Three-Month Periods Ended 2017 2016 Beginning balance $ 1,223 $ 760 Warranty provisions 10 71 Warranty claims (60) (95) Adjustments to preexisting warranties (51) 24 Currency 2 - Ending balance $ 1,124 $ 760

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Schedule of stock option activity	A summary of the option activity for the first three months of 2017 is as follows: Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Options outstanding at December 31, 2016 132,500 $ 6.15 4.50 $ - Granted - - - - Exercised - - - - Expired - - - - Forfeited (22,000) 5.72 - - Options outstanding at March 31, 2017 110,500 $ 6.24 4.00 $ - Options exercisable at March 31, 2017 92,000 $ 6.56 3.38 $ -
Table summarizes restricted stock award activity	Number of Shares Weighted Average Grant Date Fair Value Awards outstanding December 31, 2016 - $ - Granted 53,443 2.93 Exercised (21,443) 2.90 Expired - - Forfeited - - Awards outstanding at March 31, 2017 32,000 $ 2.95

Income (Loss) per Common Share

Income (Loss) per Common Share (Tables)	3 Months Ended
	Mar. 31, 2017
Income (Loss) per Common Share [Abstract]
Schedule of reconciliation of earnings per share	A reconciliation of net income (loss) per share is as follows (dollar amounts in thousands except per share data): Three-Month Periods Ended 2017 2016 Numerator: Net income (loss) $ 197 $ (292) Denominator: Weighted average common shares outstanding 5,096 5,030 Dilutive potential common shares - - Shares used in diluted net loss per common share calculations 5,096 5,030 Basic net income (loss) per common share $ 0.04 $ (0.06) Diluted net income (loss) per common share $ 0.04 $ (0.06)

Segment Information (Tables)

Segment Information (Tables)	3 Months Ended
	Mar. 31, 2017
Segment Reporting [Abstract]
Schedule of financial information by reportable segment	The following tables set forth selected unaudited financial information for each of our reportable segments (in thousands): Three Months Ended March 31, Intersection Highway Total 2017 2016 2017 2016 2017 2016 Revenue $ 1,904 $ 1,904 $ 1,180 $ 1,334 $ 3,084 $ 3,238 Gross profit 1,735 1,718 715 602 2,450 2,320 Amortization of intangible assets 90 - - - 90 - Intangible assets 2,772 1,811 107 - 2,879 1,811

Restructuring and Exit Activi25

Restructuring and Exit Activities (Tables)	3 Months Ended
	Mar. 31, 2017
Restructuring Charges [Abstract]
Schedule of restructuring activity	The following table shows the restructuring activity for the three months ended March 31, 2016 (in thousands): Facility Costs Termination and Contract Benefits Termination Total Balance at January 1, 2016 $ - $ - $ - Charges 126 - 126 Payments/settlements - - - Balance at March 31, 2016 $ 126 $ - $ 126

Basis of Presentation (Details

Basis of Presentation (Details Narrative)	3 Months Ended
	Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Royalty percentage of gross profit on licensed products	50.00%

Inventories (Details Narrative)

Inventories (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Inventories [Abstract]
Finished goods	$ 224	$ 141

Intangible Assets (Details)

Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Gross Carrying Amount	$ 6,959	$ 6,785
Accumulated Amortization	(4,080)	(3,990)
Net Carrying Value	2,879	2,795
Developed Technology Rights [Member]
Goodwill and Intangible Assets Disclosure [Abstract]
Gross Carrying Amount	3,059	2,885
Accumulated Amortization	(180)	(90)
Net Carrying Value	2,879	2,795
Computer Software, Intangible Asset [Member]
Goodwill and Intangible Assets Disclosure [Abstract]
Gross Carrying Amount	3,900	3,900
Accumulated Amortization	(3,900)	(3,900)
Net Carrying Value
Weighted Average Useful Life	8 years	8 years

Credit Facilities (Details Narr

Credit Facilities (Details Narrative) - USD ($) $ in Thousands	May 12, 2014	Mar. 31, 2017
Debt Disclosure [Abstract]
Available borrowings		$ 1,700
Alliance Credit Agreement [Member]
Debt Disclosure [Abstract]
Maximum borrowing line of credit capacity	$ 5,000
Interest rate	3.95%
Description of collateral		Inventories, accounts receivable, cash, marketablesecurities, and equipment
Expiration		May 12, 2017

Warranties (Details)

Warranties (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Product Warranties Disclosures [Abstract]
Beginning balance	$ 1,223	$ 760
Warranty provisions	10	71
Warranty claims	(60)	(95)
Adjustments to preexisting warranties	(51)	24
Currency	2
Ending balance	$ 1,124	$ 760

Stock-Based Compensation (Detai

Stock-Based Compensation (Details Narrative) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Stock-Based Compensation [Abstract]
Stock-based compensation expense	$ 65	$ 59
Stock-based compensation expense	$ 65	59
Minimum [Member]
Stock-Based Compensation [Abstract]
Stock option awards, vesting term	3 years
Stock option awards, contractual term	9 years
Percentage of vesting shares	90.00%
Maximum [Member]
Stock-Based Compensation [Abstract]
Stock option awards, vesting term	5 years
Stock option awards, contractual term	10 years
Percentage of vesting shares	100.00%
Employee Stock Option [Member]
Stock-Based Compensation [Abstract]
Stock-based compensation expense	$ 65	59
Shares available for grant	253,445
Unrecognized compensation cost related to non-vested stock awards	$ 23
Period for recognition of unrecognized compensation cost related to non-vested stock awards	1 year
Stock-based compensation expense	$ 65	59
Restricted Stock Awards [Member]
Stock-Based Compensation [Abstract]
Stock-based compensation expense	63	29
Unrecognized compensation cost related to non-vested stock awards	$ 74
Period for recognition of unrecognized compensation cost related to non-vested stock awards	3 years 11 months 12 days
Stock awards, weighted average grant date fair value	$ 2.95
Vesting rights description of stock awards granted	Executive officers vest in the restricted stock awards if the various performance or time-based metrics are met.
Stock-based compensation expense	$ 63	$ 29
Stock awards granted	52,443

Stock-Based Compensation (Det32

Stock-Based Compensation (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Number of Shares
Outstanding - beginning of period	132,500
Forfeited	(22,000)
Outstanding - end of period	110,500	132,500
Exercisable - end of period	92,000
Weighted Average Exercise Price
Outstanding - beginning of period	$ 6.15
Forfeited	5.72
Outstanding - end of period	6.24	$ 6.15
Exercisable - end of period	$ 6.56
Weighted Average Remaining Contractual Term
Outstanding	4 years	4 years 6 months
Options exercisable	3 years 4 months 17 days

Stock-Based Compensation (Det33

Stock-Based Compensation (Details 2)	3 Months Ended
	Mar. 31, 2017USD ($)shares
Restricted Stock Awards Activity [Abstract]
Awards outstanding at beginning of year	0
Granted	53,443
Exercised	(21,443)
Forfeited	0
Awards outstanding at end of year	32,000
Weighted Average grant date fair value
Outstanding at beginning of year	0
Granted | $	$ 2.93
Exercised | $	2.90
Forfeited | $	0
Outstanding - end of period | $	$ 2.95

Income (Loss) per Common Shar34

Income (Loss) per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income (Loss) per Common Share [Abstract]
Net diluted earnings (loss) per share	$ 0.04	$ (0.06)
Net basic earnings (loss) per share	$ 0.04	$ (0.06)
Numerator:
Net income (loss)	$ 197	$ (292)
Denominator:
Weighted average common shares oustanding	5,096	5,030
Shares used in diluted net income (loss) per common share calculations	5,096	5,030
Shares excluded from diluted weighted shares outstanding	125,222	278,500

Segment Information (Details)

Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting [Abstract]
Revenue	$ 3,084	$ 3,238
Gross profit	2,450	2,320
Amortization of intangible assets	90
Intangible assets	2,879	1,811
Intersection [Member]
Segment Reporting [Abstract]
Revenue	1,904	1,904
Gross profit	1,735	1,718
Amortization of intangible assets	90
Intangible assets	2,772	1,811
Highway [Member]
Segment Reporting [Abstract]
Revenue	1,180	1,334
Gross profit	715	$ 602
Intangible assets	$ 107

Restructuring (Details Narrativ

Restructuring (Details Narrative) $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)
Restructuring Charges [Abstract]
Restructuring charges related to facility closures	$ 126

Restructuring (Details)

Restructuring (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)
Restructuring Reserve [Roll Forward]
Balance at beginning of period	$ 0
Charges	126
Payments/Settlements	0
Balance at end of period	126
Termination Benefits [Member]
Restructuring Reserve [Roll Forward]
Balance at beginning of period	0
Charges	126
Payments/Settlements	0
Balance at end of period	$ 126