Image Sensing Systems Announces Second Quarter Financial Results

SAINT PAUL, Minn. , July 29 /PRNewswire-FirstCall/ -- Image Sensing Systems, Inc. (Nasdaq: ISNS), announced today record financial results for its second quarter ended June 30, 2008 . (Logo...


SAINT PAUL, Minn. , July 29 /PRNewswire-FirstCall/ -- Image Sensing Systems, Inc. (Nasdaq: ISNS), announced today record financial results for its second quarter ended June 30, 2008 .

(Logo: http://www.newscom.com/cgi-bin/prnh/20050512/CGISSLOGO)

Net income for the quarter ended June 30, 2008 was $1.2 million ($0.30 per fully diluted share) compared to $702,000 ($0.18 per fully diluted share) for the same period in 2007. Net income for the first half of 2008 was $2.3 million ($0.57 per diluted share) compared to $1.3 million ($0.32 per diluted share) for the same period in 2007.

Revenue for the second quarter was $6.7 million compared to $3.0 million for the same period a year ago, while revenue for the first half of 2008 was $12.6 million compared to $5.7 million for the same period a year ago. Revenue from royalties increased 46% to $3.4 million from $2.3 million in the second quarter of 2007 and 36% to $6.3 million in the first half from $4.6 million in the first half of 2007, reflecting the continued success of our North American distributor, Econolite Control Products, Inc. (ECPI), in selling Autoscope(R) products in the United States and Canada . North American sales, which are sales of RTMS(R) in North America , were $1.9 million for the second quarter and $3.5 million for the first half of 2008. International sales, which include both Autoscope and RTMS sales outside of North America , were $1.4 million in the second quarter, a 96% increase over $736,000 in the same period in 2007, and $2.8 million in the first half, a 157% increase over $1.1 million in the same period of 2007. Sales of RTMS world-wide for the quarter were $2.4 million. We acquired the RTMS family of products in December 2007 .

On a non-GAAP basis for the second quarter, excluding intangible asset amortization net of tax, net income increased 91% to $1.3 million ($0.34 per fully diluted share) and operating income increased 140% to $1.9 million as compared to the comparable quarter of 2007. On a non-GAAP basis for the first half, net income increased 101% to $2.5 million ($0.63 per fully diluted share) and operating income increased 150% to $3.6 million as compared to the same period of 2007.

Ken Aubrey , CEO, said, "We completed a strong first half of 2008. We began shipping RTMS G4 in Q2 and saw continued growing acceptance of the Autoscope Terra platform. All in all, we believe the integration of the EIS asset purchase and final Terra transition matters are progressing on schedule."

Follow-on Offering Update

We have received a comment letter from the Securities and Exchange Commission (SEC) on our Form S-1 registration statement that was originally filed in May. We expect that upon making the changes requested by the SEC in an amendment we would be in position to have the offering declared effective. However, given our recent share price range, we believe that proceeding with an offering at this time is not in the best interests of our shareholders. Additionally, we do not view current stock market conditions as favorable nor do we foresee the need for increased working capital at present. We continue to believe there are significant benefits to a follow-on offering and contemplate pursuing an offering when market conditions change. Please see the disclaimer below.

Auction Rate Security Update

We continue to hold $5.4 million in face value of student loan backed auction rate securities (ARS), substantially all of which are Federal government backed under the Federal Family Education Loan Program. All auctions since mid-February involving our ARS have failed. We believe that the underlying credit quality of the ARS is excellent and that the main problem remains illiquidity. Our updated analysis of the ARS fair value indicates there is a temporary impairment of $318,000 ($210,000 net of tax). The ARS are classified as long-term assets at June 30, 2008 . This unrealized loss does not flow through our income statement, rather it is recorded directly to shareholders' equity as a component of accumulated other comprehensive income/loss. There is uncertainty in the ARS market and, should circumstances change, we may deem the impairment to be other than temporary or otherwise adjust our analysis.

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