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Image Sensing Systems Announces First Quarter Financial Results

Contacts: Greg Smith, Chief Financial Officer
Image Sensing Systems, Inc., Phone: 651.603.7700

Saint Paul, Minn., May 2, 2012 – Image Sensing Systems, Inc. (NASDAQ: ISNS), announced today the results for its first quarter ended March 31, 2012.

Revenue for the 2012 first quarter was $5.3 million compared to $6.1 million for the same period a year ago. Revenue from royalties was $2.3 million in the first quarter of 2012 compared to $2.7 million in the same period of 2011. Product sales were $2.9 million in the first quarter compared to $3.4 million in the same period of 2011. World-wide, in the first quarter of 2012, CitySync product sales were $1.6 million and RTMS® product sales and royalties were $658,000 and $125,000, respectively. The March 31, 2012 quarter was the first quarter of Econolite distribution of RTMS in North America.

Net loss for the first quarter of 2012 was $(668,000) or $(0.14) per share compared to a net loss of $(808,000) or $(0.17) per share for the same period in 2011. On a non-GAAP basis, excluding intangible asset amortization and restructuring expense net of tax, net loss for the first quarter of 2012 was $(327,000) or $(0.07) per share compared to $(536,000) or $(0.11) in the same period a year ago.

Ken Aubrey, CEO, said, “Even though our revenue model has changed from product sale to royalty for RTMS, the results indicate an overall decrease in revenue from last year’s first quarter on a like comparison. Although we typically experience downward first quarter seasonality, demand in our domestic royalty businesses was below our expectations and we believe this trend may continue in the near-term. Despite the equivalent revenue shortfall, our non-GAAP operating loss was improved when compared to the 2011 first quarter owing primarily to expense reductions realized through our previously disclosed restructuring initiatives.”

The Company also announced the following significant new sales or distribution agreements:

• An order in excess of $2.0 million in Eastern Europe of Autoscope® product for an urban traffic control (UTC) system. The order is expected to be substantially delivered in Q2 and Q3.
• An original equipment manufacturer (OEM) agreement with Siemens A.G. that allows Siemens to offer Autoscope technology on a non-exclusive basis in the European market.
• An exclusive agreement with Beijing Univaid Technology Co., Ltd. for the distribution of RTMS products in the People’s Republic of China. Under the agreement, Univaid has made commitments to certain minimum purchase levels for the first year in excess of $1.0 million.

“These agreements give us confidence for continuing improved results internationally for the remainder of 2012. We are active in the final transition of domestic RTMS manufacturing and distribution to Econolite and Q1 showed related balance sheet improvements with cash and investments increasing by $1.2 million and inventories decreasing by $625,000 compared to December 31, 2011 levels. Also, as we indicated in our previous quarter’s release, we continue to be mindful of keeping operating expenses at a level commensurate to revenue achieved to improve profitability,” said Aubrey.

Non-GAAP Information

We provide certain non-GAAP financial information as supplemental information to GAAP amounts. This non-GAAP information excludes the impact, net of tax, of amortizing the intangible assets from the 2007 EIS asset acquisition and the 2010 CitySync acquisition and may exclude other non-recurring items. Management believes that this presentation facilitates the comparison of our current operating results to historical operating results. Management uses this non-GAAP information to evaluate short-term and long-term operating trends in our core operations. Non-GAAP information is not prepared in accordance with GAAP and should not be considered a substitute for or an alternative to GAAP financial measures and may not be computed the same as similarly titled measures used by other companies.

About ISS

Image Sensing Systems, Inc. is a provider of software-based detection solutions for the Intelligent Transportation Systems (ITS) sector and adjacent markets including security, police and parking. We have sold more than 125,000 units of our industry leading Autoscope® machine-vision, RTMS® radar and CitySync automatic number plate recognition (ANPR) products in over 60 countries worldwide. The depth of our experience coupled with the breadth of our product portfolio uniquely positions us to provide powerful hybrid technology solutions and to exploit the convergence of the traffic, security and environmental management markets. We are headquartered in St. Paul, Minnesota.