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Part I, Item 1A.
−Removed: “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 includes a discussion of our risk factors.
−Removed: The information presented below supplements, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on Form 10-K.
−Removed: Except as presented below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K.
+Added: “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed on May 14, 2021 includes a discussion of our risk factors.
+Added: The information presented below supplements, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report on Form 10-K/A.
+Added: Except as presented below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K/A filed May 14, 2021.
We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.
−Removed: Our business and results of operations may be adversely affected by the COVID-19 pandemic.
−Removed: On March 11, 2020, the World Health Organization designated COVID-19 a pandemic.
−Removed: In the United States and abroad, many federal, state and local governments instituted travel restrictions, stay-at-home orders, social distancing orders, and border closures in order to minimize the spread of the virus.
−Removed: COVID-19 has caused severe disruption to the global economy.
−Removed: As a result of these restrictions, we shifted most of our workforce to remote operations and have implemented changes in our physical locations to ensure social distancing.
−Removed: While we have not experienced any significant disruptions in our operations to date, these measures may result in decreases in productivity, an increased risk of information security breaches and delays in responses to our customers, which could harm customer relations and adversely impact our business.
−Removed: COVID-19 may also cause us to temporarily suspend or ultimately forego strategic acquisitions, business initiatives or expansions into new markets.
−Removed: Also, our existing customers may seek to terminate or renegotiate their contracts with us or seek pricing concessions as a result of changes in their business needs or financial condition.
−Removed: In addition, certain of our customers have reduced their operations during the pandemic, and government restrictions could further restrict our operations or result in supply chain interruptions.
−Removed: The measures implemented to contain COVID-19 have had, and we expect will continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity position, both in the near term and on a year-over-year basis.
−Removed: The COVID-19 pandemic has adversely affected our revenues from key customers in the rental car industry, on which our Commercial Services segment is dependent, and from photo enforcement programs in our Government Solutions segment.
−Removed: Our Commercial Services segment is dependent on certain key customers, including those in the RAC industry, such as Hertz, Avis Budget Group, Inc.
−Removed: and Enterprise Holdings, Inc.
−Removed: COVID-19 continues to have a significant negative impact on the RAC industry.
−Removed: Reduced airline travel and widespread travel restrictions resulted in declining customer demand and many RACs have responded by reducing fleet sizes .
−Removed: In addition, in May 2020, Hertz, one of our key Commercial Services customers, filed for bankruptcy protection under Chapter 11 of the U.S.
−Removed: Bankruptcy Code, as amended, in the United States Bankruptcy Court for the District of Delaware.
−Removed: The full extent and duration of COVID-19’s impact on the RAC industry and the financial health of our key RAC customers cannot be predicted at this time.
−Removed: However, we expect that if our RAC customers continue to experience adversity in their businesses or file for bankruptcy, they may delay or default on their payment commitments to us or request to modify or renegotiate pre-existing contractual commitments on terms that are less favorable to us, any of which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: In our Government Solutions segment, school closures and reductions in vehicle traffic resulting from COVID-19 and the related containment measures have negatively impacted revenues.
−Removed: The COVID-19 pandemic is a highly fluid and rapidly evolving situation, and we cannot anticipate with any certainty the length, scope or severity of such impacts in the jurisdictions in which we operate.
−Removed: Moreover, any additional measures or changes in laws or regulations, whether in the United States or abroad, that further impair the ability or desire of individuals to gather or travel due to the risk of the spreading of COVID-19, including laws or regulations banning travel or requiring the closure of schools, may exacerbate the negative impact of the COVID-19 pandemic on our Government Solutions segment .
−Removed: The full extent and duration of COVID-19’s impact on customers in our Commercial Services and Government Solutions segments, or the ways that COVID-19 may fundamentally alter the travel industry remains to be seen, and this ongoing impact could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
−Removed: Historical data regarding our business, results of operations, financial condition and liquidity may not reflect the impact of the COVID-19 pandemic and related containment measures and therefore does not purport to be representative of our future performance.
−Removed: The information included in this Quarterly Report on Form 10-Q and our other reports filed with the SEC includes information regarding our business, properties, results of operations, financial condition and liquidity as of dates and for periods before the impact of COVID-19 and related containment measures (including quarantines and governmental orders requiring the closure of certain businesses, limiting travel, requiring that individuals stay at home or shelter in place and closing borders).
−Removed: This historical information therefore may not reflect the adverse impacts of COVID-19 and the related containment measures.
−Removed: Accordingly, investors are cautioned not to unduly rely on historical information regarding our business, results of operations, financial condition or liquidity, as that data does not reflect the adverse impact of COVID-19 and therefore does not purport to be representative of the future results of operations, financial condition, liquidity or other financial or operating results.
−Removed: Unregistered Sales of Equity Securities and Use of Proceeds
+Added: Our largest customer, NYCDOT, has outstanding receivables with us totaling $121.0 million.
+Added: We are working with NYCDOT to clear administrative hurdles that are delaying payment, but we cannot predict when this matter will be resolved, how much it may cost or the timing of their payments to us.
+Added: We provide photo enforcement and school zone enforcement services to NYCDOT, which was our largest customer by revenue in 2020 (31.3% of total revenue for the year ended December 31, 2020), under two primary contracts:
+Added: a legacy contract relating to red light, bus lane, mobile speed and fixed speed photo enforcement cameras that were installed prior to fiscal year 2020 (the “ Legacy Contract ”), and an emergency contract for the purchase, installation, maintenance and operation of an expanded fixed speed camera program beginning in 2020 (the “ Emergency Contract ”).
+Added: In late 2019, we concluded that some of our system installations under the Legacy Contract did not meet New York City’s requirements related to the depth of buried electrical conduit and the color of grounding wire.
+Added: We disclosed these issues to NYCDOT and in the fourth quarter of 2020 agreed to remediate the affected sites.
+Added: As of the date of this Quarterly Report on Form 10-Q, our remediation efforts were substantially complete .
+Added: In late January 2021, we were separately informed that the City of New York’s Law Department (the “ NYC Law Department ”) was investigating matters related to our previously disclosed conduit depth issue as well as matters related to whether we unnecessarily installed new poles where existing infrastructure could have been used.
+Added: We were informed in March 2021 by the NYC Law Department that it had concluded its investigation, and we reached an agreement in principle to resolve the matter for approximately $1.3 million, subject to final administrative approvals.
+Added: The installation issues described above and investigated by the NYC Law Department did not have any impact on the camera operations or the overall effectiveness of the photo enforcement programs.
+Added: We continue to perform work for NYCDOT under the Legacy Contract and the Emergency Contract, and in March 2021, we received an Authorization to Proceed with the installation of an additional 720 school zone speed cameras in 2021.
+Added: In addition to the matters described above, we are actively working with NYCDOT to address various administrative hurdles that have delayed the registration of the Emergency Contract, which is a condition to receiving payment under that contract, and that are delaying payments on our invoices under the Legacy Contract.
+Added: At March 31, 2021, the Legacy Contract had an open receivable balance of $41.3 million, of which $33.1 million had aged beyond NYCDOT’s 45-day payment terms.
+Added: As of March 31, 2021, the Company had invoiced NYCDOT for $52.6 million in product revenue and $26.8 million in service revenue under the Emergency Contract.
+Added: We expect the NYCDOT open receivables balance to increase by approximately $7.3 million per month until it is paid, which does not account for any additional invoices related to product revenue for new cameras installed in fiscal 2021 or associated service revenue.
+Added: We will start installing cameras against the order for 720 new school zone speed cameras in the second quarter, which will increase the receivable balance based on the timing of the installation schedule if the invoices remain unpaid.
+Added: We cannot predict when these matters will be finally resolved, how much it may cost or the timing of the payments to us on the outstanding receivables.
+Added: The failure to resolve these matters with the City of New York in a timely and effective manner could have a material adverse effect on our business, financial condition and results of operations.
+Added: Unregistered Sales of Equi ty Securities and Use of Proceeds
Defaults Upon Senior Securities
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.