Autoscope Technologies Corporation (AATC) Earnings Call Transcript & Summary

Good morning. I'm Andrew Berger, I'm the Executive Chairman of Image Sensing Systems. I'd like to welcome you to the 2021 Annual Meeting.

Thank you, Andrew. Good morning, everyone. First, I would like to review the safe harbor for forward-looking statements. Please read the slide. The presentation that follows the official business may contain forward-looking statements within the meaning of the Securities Act of 1933, and the Securities Exchange Act of 1934 that relate to future activities, events or developments. These statements may be identified with words such as believe, anticipate, should, intend, plan, will, expects, estimates, projects, position, strategy and the like. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ. Please see our SEC filings for more information.

Thank you, Frank, and welcome to all those attending this virtual shareholder meeting. Today, you will hear from our Executive Chairman, Andrew Berger; our Chief Financial Officer, Frank Hallowell; our Senior Vice President of Sales, Marketing and Product Management, Andy Markese; and myself, Chad Stelzig, President and Chief Executive Officer of Image Sensing Systems. Today, we'll begin with shareholder vote matters, followed by an overview of our 2020 financial performance. We will then speak to 2020 company initiatives, our technical road map and an update on market conditions. We will close out the meeting with our Chairman addressing the recent announcement of a company reorganization. [Operator Instructions] With that, let me introduce our CFO, Frank Hallowell.

Now for the official part of the meeting. The bylaws of Image Sensing Systems provided to every shareholder of record or his or her legal representative as of the record date is entitled at this meeting to 1 vote for each share of common stock outstanding in his or her name on the company's books. The Board of Directors has set March 8, 2021 as the record date for this meeting. Our records indicate that as of that date, there were 5,352,626 shares outstanding. The record of this meeting should reflect that a notice of Internet availability of proxy materials, a notice of this meeting, a proxy statement and a proxy were filed with SEC on March 18, 2021 and as applicable, mailed beginning on or before March 19, 2021 to the shareholders of the company is entitled to vote at this meeting. A copy of the notice, proxy statement and proxy will be made a permanent part of our records. Quorum requirements are that at least 2,676,314 shares must be represented at this meeting, either by shareholders present in the virtual meeting or by proxies on file with the company. As of May 3, 2021, a total of 4,179,822 votes have been cast and are represented at this meeting. Therefore, as the company secretary, I certify that a quorum is present for this meeting. Proposal #1, election of directors. The first proposal is the election of 6 directors. The Board of Directors has nominated the following persons, all of whom are currently serving as directors of Image Sensing Systems, except for Brian J. VanDerBosch: Andrew T. Berger; James W. Bracke; Joseph P. Daly; Geoffrey C. Davis; Paul F. Lidsky; and Brian J. VanDerBosch. Because of the rules enacted in 2010, brokers cannot vote for the election of directors and many other matters on a discretionary basis. This has the natural effect of lowering the number of votes for each of the candidates and other matters. Based on the number of votes that have been cast by proxy, at least 2,312,844 shares have been voted in favor of each of these nominees, and they have all been elected as directors. There were approximately 1,335,361 shares that were broker non-votes. Proposal #2, ratification of the appointment of Boulay PLLP. The second proposal is the ratification of the appointment by the Audit Committee of the Board of Directors of Boulay PLLP as the independent registered public accounting firm for Image Sensing Systems for the year ended December 31, 2021. This is the only matter which brokers may vote. Based on a number of votes that have been cast by proxy, the appointment of Boulay PLLP has been ratified with at least 4,167,602 shares having voted in favor of the proposal. Proposal #3, vote on the advisory resolution to approve executive compensation. The third proposal is a vote on advisory resolution to approve the compensation paid to our named executive officers. The resolution is in the proxy statement for this meeting. This vote is nonbinding, but gives our Board guidance as to shareholder preference on the executive compensation. As with the director elections, broker non-votes cannot be included in the results other than they count towards achieving a quorum. Based on the number of votes that have been cast by proxy, at least 2,790,453 shares have been voted in favor of approving the advisory resolution to approve the compensation paid to our named executive officers with 54,008 shares either against or abstaining. There were approximately 1,335,361 shares that were broker non-votes for the proposal. Proposal #4 approved the adoption of an amendment to Section 382 rights agreement. The fourth proposal is to prove the adoption of an amendment to our Section 382 rights agreement designed to preserve our net operating loss carryforward and other tax benefits. As with previous proposals, broker non-votes cannot be included in the results, other than they count towards achieving a quorum. Based on the number of votes that have been cast by proxy, at least 2,716,210 shares have been voted in favor of approving the advisory resolution to the adoption of an amendment to our Section 382 rights agreement with 128,251 shares either against or abstaining. There were approximately 1,335,361 shares that were broker non-votes for the proposal. Proposal #5, approve the increase in the number of shares subject to the Image Sensing Systems, Inc. 2014 stock option and incentive plan. The fifth and final proposal is to approve the increase in the number of shares available under the Image Sensing Systems, Inc.'s 2014 stock option and incentive plan by 120,000 shares. As with previous proposals, broker non-votes cannot be included in the results, other than they count towards achieving a quorum. Based on the number of votes that have been cast by proxy, at least 2,754,150 shares have been voted in favor of approving the increase in the number of shares, subject to the Image Sensing Systems, Inc. 2014 stock option and incentive plan, with 90,303 shares either against or abstaining. There were approximately 1,335,361 shares that were broker non-votes for the proposal. [Operator Instructions] Andrew, this concludes the official portion of the shareholder meeting, and I, as Secretary of the company, declare the official meeting is now adjourned. Now let's review recent financial results. Images Sensing System reported financial results for the quarter ended March 31, 2021, yesterday, May 3. The following discussion will cover key financial performance metrics for the last 3 calendar years ending December 31, 2018, 2019 and 2020, and for the first quarter ending March 31, 2021. We are the leading provider rider of above ground detection products and solutions for the intelligent transportation system industry, our family of products, which we market primarily as Autoscope Video and RTMS radar provides end users with the tools needed to optimize traffic flow and enhanced driver safety. Our technology analyzes signals from sophisticated sensors and transmit that information to management systems and controllers or directly to end users. We market our Autoscope products in United States, Mexico, Canada and the Caribbean through an exclusive green with Econolite Control Products, which we believe is a leading distributor of intersection control products in these markets. We market our RTMS radar systems through a network of distributors in North America, the Caribbean and Latin America. On a limited basis, we sell directly to the end user in these geographic areas. We market our Autoscope and RTMS products outside the United States, Mexico, Canada and the Caribbean through a combination of distribution and direct sales channels through office in Spain. We currently operate in 2 reportable segments: intersections and highways. Autoscope is our machine vision product line and revenue consist of Econolite royalties as well as a portion of international product sales. Video products are normally sold in the intersection segment. The RTMS radar is our radar product line and revenue consist of sales to external customers. Radar products are normally sold in the highway segment. Our quarterly revenues and operating results have varied significantly in the past due to the seasonality of our business. Our first quarter generally 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. Product sales gross profit for the intersection product lines has historically been lower than gross profit for the highway product lines, and therefore, the mix of the product lines sold at any given period can result in varying gross profit. Additionally, the gross profit sales mix of our product sales can influence margins as products sold in some jurisdictions have lower margins. For further information on the company's financial performance, please see our filings with the SEC and on our website at imagesensing.com. Comparing year ended December 31, 2020, to the year ended December 31, 2019, total revenue decreased approximately 11% to $13.2 million in 2020 from $14.7 million in 2019. Royalty income remained essentially unchanged at $8.3 million in 2020 compared to 2019. Product sales decreased approximately 25% to $4.8 million in 2020 from $6.4 million in 2019. The decrease in product sales was primarily a result of COVID-19 related challenges that impacted increasing numbers of regions throughout the year. Revenue for intersection segment decreased approximately 3% to $9.3 million in 2020 from $9.6 million in 2019. Revenue for the highway segment decreased approximately 23% to $3.9 million in 2020 from $5.1 million in 2019. Product sales gross profit decreased $1.2 million or 34% compared to the prior year. Gross margin for product sales decreased to approximately 50% in 2020 and 57% in 2019. The decrease in product sales gross profit is primarily the result of COVID-19 related challenges that impacted increasing numbers of regions throughout the year. Product sales gross margins declined primarily due to higher warranty expenses associated with certain legacy radar products. Gross profits for royalties in 2020 increased $28,000 or less than 1% compared to the prior year. Gross margin for royalties sales remained unchanged at 95.6% in 2020 compared to 2019. Selling, marketing and product support expense decreased to $2.5 million in 2020 compared to $2.7 million in 2019, primarily due to lower headcount and related salary and commission expense. General and administrative expense decreased to $3.9 million in 2020 compared to $4.3 million in 2019, primarily due to lower headcount, rent and other variable spending, offset somewhat by additional legal and consulting expenses. A portion of general and administrative spending during 2020 consisted of legal and consulting costs related to the efforts around exploring strategic alternatives to maximize shareholder value that we announced in January of 2020. In light of current market conditions, including the effects of the COVID-19 pandemic, the strategic review process was terminated in October of 2020. Research and development expense decreased from $2.8 million in 2019 to $3.3 million in 2020. The increase is due to decreased capitalization of software development costs in 2020 of $22,000 compared to capitalized software costs of $1.2 million in 2019. After normalizing for software development costs, overall research and development expenditures decreased in 2020 compared to 2019 due to lower headcount. In the third quarter 2018, the company implemented restructuring plans for its office in Romania. Because of these actions, restructuring charges of approximately $2,000 were recorded in 2019 compared to no such costs recorded in 2020. An income tax benefit of $5.2 million was recorded for the year ended December 31, 2019, compared to an income tax benefit of $460,000 for the year ended December 31, 2020. During 2019, the valuation allowance was partially released for the deferred tax assets that the company is likely to realize in the foreseeable future. This resulted in a $5.2 million noncash income tax benefit from the recognition of $5.3 million in net deferred tax assets during 2019. Consolidated income was $7 million or $1.33 per share in 2019 compared to a consolidated income of approximately $1 million or $0.22 per share in 2020. Comparing the first quarter ended March 31, 2021 to the quarter ended March 31, 2020, total revenue decreased approximately 6% to $3 million in the first 3 months of 2021 from $3.2 million in the same period in 2020. Royalty income decreased approximately 14% to $1.8 million in the first 3 months of 2021 and $2.1 million in the first 3 months of 2020. The decrease in royalty income is due to varying demand and timing of sales. Product sales increased approximately 11% to $1.2 million in the first 3 months of 2021 from $1.1 million in the first 3 months of 2020. The increase in product sales is due to a limited reopening of several markets that were previously restricted due to COVID-19 pandemic. Revenue for the intersection segment decreased approximately 16% to $1.9 million in the first 3 months of 2021 from $2.3 million in the first 3 months of 2020. Revenue for the Highway segment increased approximately 20% to $1.1 million in the first 3 months of 2021 or approximately $1 million in the first 3 months of 2020. Gross profit from royalties decreased $294,000 or approximately 15% in the first quarter of 2021 compared to the prior year period. Gross margin percent for royalty sales for the 3 months ended March 31, 2021 decreased to 94.9% from 95.6% in the same period in 2020. The decrease in gross margin percent was due to lower royalty revenues, as discussed previously, while software amortization expense remained substantially the same. Product sales gross profit increased $31,000 or 6% in 3 months ended March 31, 2021 compared to the prior period. Gross margin percent for product sales decreased to 47.3% in the first 3 months of 2021 from 49.4% in the first 3 months of 2020. The decrease in product gross margin percent was primarily a result of a higher warranty expenses on legacy radar products. Selling, general and administrative expense decreased to $1.4 million in the first 3 months of 2021 compared to $1.9 million in the first 3 months of 2020. Selling, general and administrative expense decreased due to lower legal and consulting costs related to the efforts around exploring strategic alternatives to maximize shareholder value that we announced in January of 2020. In light of current market conditions, including the effect of the COVID-19 pandemic, the strategic review process was terminated in the fourth quarter of 2020. Research and development expense decreased to $496,000 in the 3-month period ended March 31, 2021 from $902,000 in the 3-month period ended March 31, 2020. The decrease was due to higher capitalized software development costs in the 3-month period ended March 31, 2021 of $123,000 compared to capitalized software development costs of only $22,000 for the same period in 2020. After normalizing for software development costs, overall research and development expenditures decreased in the 3-month period ended March 31, 2021, compared to the same period in the prior year due to lower headcount. The company recognized other income of $931,000 for the forgiveness of the payroll protection program loan and accrued interest during the first quarter of 2021. There was a $205,000 of income tax expense and $164,000 of income tax benefit recorded in the 3 months ended March 31, 2021 and 2020, respectively. Consolidated income was $1.1 million or $0.21 per share in the 3-month period ended March 31, 2021, compared to a net loss of $111,000 or $0.02 per share in the comparable prior period. The company's net working capital position has improved over the last 3 years, primarily due to more timely payments on accounts receivable and lower inventory balances. As of December 31, 2020, we had $8.6 million in cash compared to $5.1 million on December 31, 2019, or an increase of $3.5 million. Our cash position increased over the year ending 2019 due to the timing of collection on outstanding receivables, higher trade payable balances, lower capitalized software development cost and the funding of a payroll protection program loan from the United States Small Business Administration. On April 17, 2020, the company entered into a payroll protection program loan and received proceeds of approximately $924,000 on April 22, 2020. On March 31, 2021, we had $8.2 million in cash compared to $8.6 million in cash on December 31, 2020, or a decrease of approximately $400,000. Our cash position decreased over the year ending 2020, primarily due to an increase in accounts receivable and investments in capitalized software development efforts, offset somewhat by lower trade payable balances. On February 2, 2021, the company is notified by the lender and Small Business Administration that the payroll protection program loan had been forgiven. The company recognized the amount for the loan forgiven as other nonoperating income in the first quarter of 2021. We believe that our cash position as of March 31, 2021 and cash provided by operating activities will satisfy our projected working capital needs, investing activities and other cash requirements for at least 1 year from the date of these financial statements. This concludes my remarks concerning recent financial performance. [Operator Instructions] I would now like to introduce Chad Stelzig, President and Chief Executive Officer of Image Sensing Systems, who will provide an update on the company. Chad?

Let's now I move into a discussion of our business, who we are, what we do and the direction we are headed. Image Sensing pioneered the use of machine vision in the intelligent transportation systems market over 30 years ago. In that time, we have expanded our offerings to include radar detection and software platforms and have sold over 150,000 sensors in over 70 countries. We have established a strong global brand and reputation for reliability, accuracy and ease of use. Image sensing is composed of 35 employees, headquartered in St. Paul, Minnesota. We also have offices in Toronto, Canada, and Barcelona, Spain to provide regional sales and support. Our core market segments include real-time intersection control, highway data collection and traffic management and safety critical applications such as incident detection. All of our solutions are created through innovation, and we pride ourselves in advanced technology core competencies, such as machine vision, artificial intelligence, ruggedized computing and signal processing. We believe that we can make a difference. We can make the world a cleaner, more efficient and safer place to live. We do this by creating innovative technologies that produce highly accurate, meaningful and reliable data to empower smarter decisions, maximize the full potential of our roadway infrastructure and to optimize the safety and efficiency of every city. We also have the unique opportunity to address these needs on a global scale as we continue to deploy solutions around the world. ISS was founded on the belief that computer vision could provide new value to the transportation market and serve as a noninvasive alternative to inductive loops. This belief has held true throughout the years as we have continued to create the best-in-class detection algorithms that deliver real-time, actionable data to maximize efficiency and safety at intersections for vehicles as well as vulnerable road users, such as bicycles and pedestrians. Our flagship model, Autoscope Vision, is primarily sold into the North American intersection market through our long-standing business partner, Econolite. With a pioneering spirit similar to image sensing, Electronic Integrated Systems, or EIS, created a radar-based vehicle detection sensor that provided a cost-effective, noninvasive alternative to inductive loops on the highway. Through acquisition of EIS in 2007, Image Sensing entered the highway data collection and advanced traffic management system markets with the RTMS radar platform. Image Sensing continues to innovate in the area of advanced radar processing and data creation with Echo launched in February of 2020. The Echo platform provides lane by lane individual vehicle speed and classification as well as the ubiquitous measurement of volume and occupancy. This product was designed with connectivity in mind leveraging secure Wi-Fi, Ethernet and a provision for cellular connectivity. This low latency, high bandwidth communication, paired with the ability to store 1 million individual vehicle records, positions Echo as a powerful IoT data source. Drivers wrongfully entering the highway from an off-ramp holds a serious safety risk and can result in injury or fatalities. The detection of these wrong way drivers is vital to reducing these risks. We created the wrong way detection system with one goal in mind, to save lives. Our wrong way solution continuously monitors the roadway and utilizes advanced computer vision algorithms to determine when a vehicle is traveling the wrong direction. Upon detection, our solution will immediately trigger flashing lights and signs to warn the driver of their error. Thankfully, these warnings often result in the driver self correcting. In parallel, the detection event is rapidly validated and forwarded to the appropriate DOT or public safety agency. As with all companies over the past year, we experienced our share of challenges and new opportunities. The year began with an exploration of strategic alternatives to maximize shareholder value. While we received significant interest, in the end, we decided our best opportunity for shareholder returns would be to continue executing our strategic plan, operating efficiently and continuing to innovate. We also launched a new radar product, RTMS Echo, in February of 2020 that expands our serviceable highway market by approximately 25% with the inclusion of per vehicle speed measurement. Through the hard work of our sales, marketing and product teams, we were able to build a pipeline in excess of $2 million during a pandemic with no in-person sales visits, a tremendous accomplishment. We responded quickly to COVID in March with an immediate transition to fully remote work. We are fortunate that the vast majority of our work is portable and can be executed outside the office. This allowed our employees to stay healthy and, with increased communication, connected as well. We anticipate a return to the office under a hybrid model as early as the third quarter, but dependent on regional guidance. With the elevated level of market uncertainty in 2020, we directed much of our development resources towards the enhancement of existing product offerings. This helped ensure that we could capture near-term revenue and reduce risk in an already challenging environment. Our remaining resources focused on research topics such as machine learning, cloud deployment and scalable architectures. This foundational work has already been put to use in 2021 as we deploy additional detection functionality on Autoscope Vision to address vulnerable road users. In the fourth quarter, we executed a small restructuring that addressed misalignment between certain skill sets and our strategic road map. These changes cleared the way for organization rebuilding in 2021 as well as extending our development team to include resources from lower cost labor regions. Once complete, we will have a more scalable and efficient development team that will allow us to experiment and learn quickly as we begin our digital transformation. We look at our roadways with one goal in mind, to ensure we create a better quality of life for the residents in our communities by improving traffic flow, decreasing congestion and improving safety every single day. As we look to the future, we want to take these same aspirations into new market segments, leveraging our experience from 30 years of safety-critical, real-time detection. We have lived with an expectations of 24/7, 365 high accuracy data generation and can bring new value to verticals that have been underserved and underwhelmed. To accomplish this, we have embarked on a digital transformation that will create new value and revenue opportunities. This transformation begins at the edge with the modernization of our sensors. Through development and deployment of a portable in machine learning detection engine and effortless connectivity, we can advance beyond legacy applications involving fixed infrastructure and industry-specific interfaces. This move will position us with continued relevance as processing and infrastructure evolves in the coming years. We also will emphasize the value of our software over the historic hardware-centric value model. We believe this will allow us to compete in markets where hardware becomes commoditized and pricing pressures increase. None of this matters if the customer is unable to configure, manage and access their data. Our move from on-prem data management to cloud-hosted data services will enable effortless access to their edge devices and data. Furthermore, the inherent scalability and transactional nature of cloud-hosted solutions will ensure our services will, in fact, scale with a growing customer base. Once complete, we anticipate this transformation to result in new services and revenue streams within and adjacent to our core markets. We believe Image Sensing can deliver products and services better, more intelligently and at a higher standards than what the market has come to expect. We do this by making products that are incredibly accurate, easy to use and unyieldingly resilient. I'll now hand it over to Andy Markese, our Senior Vice President of Sales, Marketing and Product Management.

To begin, I'd like to define royalty and product sales, how we go-to-market in each segment and our overall delivery capabilities. Royalties defined by a single long-standing partner in North America that manufactures, markets, sells and supports our world-class intersection detection product, Autoscope Vision. This is unique relationship and has endured for more than 30 years. Product sales is a global organization that leverages a value-added distribution network of highly experienced and engaged selling partners in the ITS space. Globally, they represent RTMS radar products for highway applications. And the rest of the world, excluding North America, they represent Autoscope-branded intersection products. Because of our reputation for world-class aboveground detection solutions and our commitment to stand behind our products, many of our partners have been with us for over 10 years, and some for more than 15 years. Product partners are directed by our sales management team towards organizational objectives. We're very analytical in how we choose our geographies and partners to ensure that we can establish and expand penetration in our selected areas. The partners we work with are focused, they're well connected to local agencies and they help influence product enhancement and future developments. The backbone of our capabilities is our industry-leading detection algorithms. They lead to superior intersection traffic flow while protecting vulnerable roadway users. They ensure a smooth and congestion-free commute on the highways of the communities we serve and offer advanced detection for potential roadway incidents impacting roadway safety. Our market is looking for actionable insight, and we deliver that by providing traffic measurements, data collection and incident alerting to traffic management professionals who need a clear picture of their transportation infrastructure. Moving on to a current success story that highlights our ability to develop and sell a newly released product in a challenging market. Let's talk about RTMS Echo. This product is globally sold to address the demands of various highway ITS applications. Entirely conceived and built in Minnesota utilizing our own internal engineering talent, Echo was developed to compete against any competitor anywhere. With per vehicle data and competitor communication protocols, we can break any specification where we once could not compete. We launched in early 2020, right in line with the COVID pandemic launch. However, our sales team and channel partners went to work immersing in virtual product training sessions and were able to effectively bring this product to market, ultimately building a pipeline valued at many millions. While the entire pipeline may not convert, we are winning today, and we are winning in competitive areas where we have not won in recent memory. In Q1 2021, Echo accounted for more than 40% of our RTMS sale volume and was supported by competitive displacement wins. So far, we've proven our tactics and strategies. We've proven them in a market that has lengthy sales cycles, 12 to 18 months in some cases. The future looks bright for Echo and the market is responding. It's an advantageous position to be able to describe Echo's early success story, but we know that we cannot stand still. The base ITS market is rebounding and opportunities are opening beyond today's needs for detection and reports. Looking slightly ahead, I'd like to talk about a few market opportunities that exist today, some are near-term like wrong way ALERT TRUST. And let me describe ALERT TRUST for you. ALERT TRUST is an automated validation service to ensure near 100% accuracy of wrong way driver alerts. False alarms are a major problem for agencies, so accurate notifications are a top requirement of the market. So far, this model of wrong way detection paired with ALERT TRUST has generated positive early market feedback and multiple agencies. This model also offers the potential of a reoccurring revenue stream and has a data-centric value proposition to explore in other market applications. Another area under exploration is temporary counting and traffic studies. We've got an ongoing market assessment using our existing Echo sensor, with a planned enhanced cloud-based visualization and reporting tool that will streamline and automate this needed insight valued by transportation professionals everywhere. These applications are near term, and we've undertaken these efforts to increase our industry circle of influence, improve access to decision-makers and open new revenue streams while enhancing the communities we work in. The effort takes time as we compete in an industry that has a lengthy sales development cycle, as I mentioned earlier. Looking further ahead, our future in the ITS market will evolve. We're leveraging our strong brand position and demonstrated ability to develop and cultivate partners towards innovation that engages a portable and scalable detection engine, working in conjunction as part of a larger ecosystem in the future. The data and insight generated will be used in real-time and offer immediate customer and community value. The market is open to this type of innovation, and we are in an excellent position to leverage our expertise and drive ahead. Thank you.

Thank you, Andrew. Now I would like to discuss the holding company reorganization. To begin with, the holding company structure allows us to pursue new business ventures outside of our core operations and, at the same time, structuring those ventures, both legally and financially independent from one another. This structure reduces risk as liabilities from one business will not automatically be transferred to other business units or the holding company itself. Philosophically, it also provides us with the framework that we're planning to pursue new ventures, not just directly in our traditional narrow segments of intersection, highway automotive detection. Now those different businesses we may acquire don't have to be completely different than our existing business lines. Perhaps we want to license or do a joint venture with some of our existing technology, but just not do it in the intersection or highway markets. For example, we might want to use our technology in completely different industries, such as military, security, retail or nonautomotive forms of transportation, such as shipping or aviation. Image Sensing Systems has been and continues to be an innovator at intersection and highway automotive detection. This change in our corporate structure will not take away from the company's historic mission, but by leveraging existing resources, we're only seeking ways to further enhance the value of our assets and ultimately be more profitable, which would then provide us with even more opportunities to reinvest in our technologies. More profit means we can afford to invest more in the future rather than just fight for survival today. It's quite common that technology companies develop technology that turns out to be useful in many other industries from which they're first intended. And by forming a holding company and broadening our potential paths, we're opening ourselves to benefit from those opportunities. Our existing business, as part of this organization, will become a subsidiary inside our new holding company. As a way to bridge our past with our future, we've decided to name the new holding company Autoscope Technologies Corporation. It's an interesting choice because relatively few people know us by our current corporate moniker, Image Sensing Systems, but rather, within our industry, nearly everyone knows our core foundational product, Autoscope. With a total of over 150,000 installations, our Autoscope products are ever-present throughout the country. So renaming our holding company after our most famous and successful product is a way to bridge our past and present with our future. We're not abandoning our core. We're leveraging its success to build a bigger and better enterprise. Our first priority at the holding company will be to fund high-return opportunities within our existing business in the most intelligent way. I recall an event a couple of years back when we were working on the design of our new antenna for our radar product in order to radically improve its capabilities. We had 2 choices about how to pursue the project. One was pretty much 100% sure solution, but that sure solution would take about 2 years and cost over $1 million to complete. The other choice, however, we were confident could work, but it was not 100% certainty. Though it would only cost a small fraction of the money and take a small fraction of the time to build, worst-case scenario, the project would cost a little bit more than doing it the sure way, but at worst case, it would just be a few extra months as well. Institutions don't like failing, so it's quite common for a decision like that to take the riskier approach to be very difficult to do, if not completely rejected. Public companies tend to err on the side of sure bets rather than an attractive risk-reward situation like this potential situation. Now as it turns out, we made the choice to take the risk. In the end, it worked out as hoped, the shortcut was successful. But regardless of the outcome, the decision to take the risk was the right one. It was the better business decision. That being said, were we a company that provided quarterly sales and earnings expectations to the public, we would have been put into a bind, whereby good bets like this one might be too risky for our reputations to pursue. Within our current operations, we continue to pursue opportunities to create value with a similar philosophy, and that's why we will continue our policy of not issuing or commenting on quarterly projections. Our approach to risk and opportunity is emblematic of how we intend to grow the company. It's at the heart of all entrepreneurial endeavors. It's okay to fail if you're taking small risks, and you're willing to fail fast, and when failure occurs, to move forward to new projects. Through this approach, we open ourselves to potential victories that can build a much more successful business. We need to remember that the creation of our company was not luck or a grand formulated plan, but it was built on this type of attitude and philosophy. Bureaucracy should enhance and embrace entrepreneurship, not stifle it. Our holding company approach and philosophy does just that. Growing the holding company in the future could take many different forms. First off, it could be the acquisition of an existing competitor in our current field, combining resources and technology and operating efficiencies. Interesting in the company's history is it's never made such an acquisition. Second, we don't have to build all our own technology. We can acquire a great piece of technology from another company, rebrand it and sell it through our existing channels. Our industry reputation and global reach can be an enormous value addition to any number of new traffic industry products. This tactic is so simple that many intelligent management teams might find it rather pedestrian since we have our internal ability to engineer those products, but we are here to generate profits efficiently, not to exercise our egos. Thirdly, as I mentioned before, we could take our existing technology that could be used for non-traffic industry purposes and then use it as a basis to form a new company to pursue new markets. There are already countless cameras already Internet-enabled by which we could connect to and perform detection services remotely. Historically, nearly all our revenue was connected to selling hardware that contained our technology. Looking forward, I believe the best opportunities within our core business will be leveraging already existing hardware. That change could allow for faster growth opportunities and also change our financial model to be one primarily based on recurring revenue. All these opportunities can be structured in a ways that are low-risk and high return. And that's really the way we're going to think about growing this company and its subsidiaries. It's not about being bold and trying to run through brick walls. It's about being smart and finding the doors in those brick walls and easily walking through to the other side. As part of our commitment to profitability, we've instituted our first quarterly dividend in the amount of $0.12 a share. Based on our annual budgets, we expect to produce more cash flow than the dividend will cost us, and we already hold ample cash resources, which at the same time will provide us capital to expand our enterprise. We are committed to produce value to our stockholders. We have felt the market undervalues our stock and the standard approach for a small public company such as ours would be to spend significant sums of money and management resources on Investor Relations and roadshows. Rather than this approach, we've decided that a regular cash dividend should provide a superior alternative, assuring investors that your capital is being wisely invested. Also, I personally like the public commitment to profitability that such a dividend entails. Lastly, as part of the holding company reorganization, I will become the CEO of the holding company rather than just the Executive Chairman role that I currently held. Chad Stelzig will retain his CEO and President role at what will become our Image Sensing Systems subsidiary. Chad's performance over the last few years is what is allowing us to make new growth endeavors. While I know no one better able to presently lead our traditional business, the skills and experience to acquire and manage new businesses will be better handled by myself having substantial experience in mergers and acquisitions, both in private and public companies. Before addressing any questions, I would like to thank our employees. We only have a few dozen employees and their contribution can be felt and seen in our great products. We're a family-sized business, and we care about our employees beyond mere financial effects. We've asked a lot from them, especially during this pandemic, and the team has delivered. It doesn't show up in our financial statements, but our strongly dedicated team is a tremendously valuable asset that furthers my confidence in our future. Change is never easy, but it is the key ingredient to building a successful future. I'm confident, with their continued dedication, our company will achieve much more. This represents the conclusion of Image Sensing Systems 2021 Annual Meeting. I'd like to thank everyone for their attendance. This year, the meeting was held entirely virtual. I hope next year, we could see many of our stockholders in person at our headquarters. Thank you very much.