Contents - AL-Tax

9.1 Summary of Key Facts 127authorities’ limited budgets, have motivated certain suppliers to enter into long-termleases with tolling authorities to operate and maintain roads and install ETC infrastructureand equipment, in return for rights to retain toll revenues. (As noted, thesearrangements have involved substantial up-front payments by the concessionairesto the governmental authorities, as with other large-scale infrastructure projects.)On a smaller scale, tolling authorities may negotiate arrangements with suppliersin which the latter retain ownership of the ETC equipment and provide programimplementation services, while the tolling authority retains ultimate responsibilityfor operating the highways, tunnels, bridges and other transportation-related infrastructureunder its mandate.FP develops, manufactures and sells certain ETC equipment and infrastructureassets that embody proprietary technology. The preponderance of FP’s sales are toUSS, although it also sells in low volumes to local governments in the Middle Eastand Asia.FP has developed and funded all proprietary intellectual property embodied in theGroup’s equipment and infrastructure assets. It also licenses off-the-shelf softwareto debit customers’ prepaid accounts, view violation files and document that databits have not been changed. FP is likewise the holder of all patents, whether filedin Japan, the United States or elsewhere. Although certain innovations have comeabout as a result of tolling authorities’ requests for specific system modifications,FP retains ownership of all such intellectual property as well.The elements of ETC systems produced by the Group include the following: Antennas; Transponders; Industrial and commercial cameras (used to take video clips of each alleged violation); Camera and flash enclosures (large metal units that house the camera systemson-site); and, A site deployment control module (SDCM) that utilizes in-road sensors (loopsembedded in the road) to detect vehicle weight and number of axles.FP sources certain standard, commercially available components from third parties.Core third party-sourced items include the industrial and commercial camerasand lenses incorporated into the Group’s system, and all system enclosures. However,FP substantially modifies the components sourced externally to conform tospecifications developed for particular applications. The SDCM is built internally,as are the antennas and transponders.FP’s manufacturing operations are located in its domestic market. The Companyemploys a 175-person production staff responsible for manufacturing control modules,antennas and transponders, as well as customizing and assembling ETC components.In addition to these functions, FP’s production staff is responsible for testingand calibrating the completed systems. Such testing is quite extensive becauseaccuracy is extremely important. Certain performance criteria are established internally;others are established by governmental regulation.