UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1997 Commission File Number 0-26056
- ----------------------------------- ------------------------------
IMAGE SENSING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1519168
State of other jurisdiction of I.R.S. Employer Identification No.
incorporation organization
500 SPRUCE TREE CENTRE
1600 UNIVERSITY AVE. W.
ST. PAUL, MN 55104-3825
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 603-7700
Not applicable
(Former name, former address, and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value -- 2,475,000 shares as of April 21, 1997.
IMAGE SENSING SYSTEMS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Condensed Financial Statements:
Condensed Balance Sheets
March 31, 1997 and December 31, 1996 3
Condensed Statements of Operations
Three month periods ended March 31, 1997 and 1996 4
Condensed Statements of Cash Flows
Three month periods ended March 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
IMAGE SENSING SYSTEMS, INC.
CONDENSED BALANCE SHEET
March 31, December 31,
1997 1996
----------- -----------
ASSETS (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 1,522,000 $ 1,694,000
Accounts receivable 985,000 772,000
Refundable and deferred income taxes 63,000 63,000
Inventories 70,000 70,000
Prepaid expenses 25,000 45,000
----------- -----------
Total current assets 2,665,000 2,644,000
Property and equipment, net 601,000 614,000
----------- -----------
Total Assets $ 3,266,000 $ 3,258,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 342,000 $ 296,000
Accrued compensation 148,000 159,000
Prepaid contract service fee 95,000 127,000
----------- -----------
Total current liabilites 585,000 582,000
Deferred income tax liability 36,000 36,000
Shareholders' equity:
Common stock 25,000 25,000
Additional paid-in capital 3,875,000 3,875,000
Retained earnings (deficit) (1,255,000) (1,260,000)
----------- -----------
2,645,000 2,640,000
----------- -----------
Total liabilities and shareholders' equity $ 3,266,000 $ 3,258,000
=========== ===========
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes
IMAGE SENSING SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Month Period Ended
March 31
---------------------------
1997 1996
---------------------------
REVENUE:
Product sales $ 352,000 $ 74,000
Royalties and commissions 521,000 420,000
Consulting and contract fees 32,000 136,000
----------- -----------
905,000 630,000
COSTS OF REVENUE:
Product sales 165,000 29,000
Royalties and commissions 66,000 46,000
Consulting and contract fees 31,000 93,000
----------- -----------
262,000 168,000
----------- -----------
Gross profit 643,000 462,000
OPERATING EXPENSES:
Selling, general and administrative 495,000 768,000
Research and development 171,000 319,000
----------- -----------
666,000 1,087,000
----------- -----------
Loss from operations (23,000) (625,000)
Other income, net 28,000 30,000
----------- -----------
Income (loss) before income taxes 5,000 (595,000)
Income taxes (benefit) -- (18,000)
=========== ===========
Net income (loss) $ 5,000 $ (577,000)
=========== ===========
Net income (loss) per common share $ -- $ (0.23)
=========== ===========
Weighted average number of shares
and common share equivalents outstanding 2,475,000 2,475,000
=========== ===========
See accompanying notes
<TABLE>
<CAPTION>
IMAGE SENSING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Month Period Ended
March 31
----------------------------
1997 1996
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 5,000 $ (577,000)
Adjustments to reconcile net income (loss) to
net cash used in operating activities (147,000) (46,000)
----------- -----------
Net cash used in operating activities (142,000) (623,000)
INVESTING ACTIVITIES:
Purchase of property and equipment (30,000) (43,000)
----------- -----------
Net cash used in investing activities (30,000) (43,000)
FINANCING ACTIVITIES: -- --
----------- -----------
Increase (decrease) in cash and cash equivalents (172,000) (666,000)
Cash and cash equivalents, beginning of period 1,694,000 2,564,000
----------- -----------
Cash and cash equivalents, end of period $ 1,522,000 $ 1,898,000
=========== ===========
See accompanying notes
</TABLE>
IMAGE SENSING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
Note A: Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principals for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. For further
information, refer to the financial statements and footnotes thereto for the
year ended December 31, 1996.
Note B: Net Income Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 128, "Earnings Per Share". This Statement replace the presentation
of primary earnings per share (EPS) with basic EPS and also requires dual
presentation of basic and diluted EPS for entities with complex capital
structures. This Statement is effective for the fiscal year ending December 31,
1997. For the quarter ended March 31, 1997, there is no difference between basic
earnings per share under Statement No. 128 and primary net income per share as
reported.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Three Month Period Ended March 31, 1997)
Revenues for the first quarter of 1997 were $905,000 up 44% from $630,000 for
the same period a year ago. The increase in first quarter revenues was due
primarily to added sales of Autoscope(R) systems by both ISS directly overseas
and by our North American distributor. One direct sale to an Asian customer
accounted for over $245,000 of product sales.
Gross profits were $643,000 in the first quarter of 1997, or 71% of revenue,
compared to $462,000, or 73% of revenue, for the same period a year ago. The
reduced margin in 1997 is due primarily to proportionately more revenue from
direct sales, which have lower gross profit margins than royalties and
commissions.
Selling, general and administrative expenses were $495,000 for the first quarter
of 1997 compared to $768,000 for the same period a year ago. The decrease was
due primarily from reduced personnel costs in technical, sales and marketing as
fewer personnel are now employed in each of these areas..
Research and development expenses were $171,000 for the first quarter of 1997
compared to $319,000 for the same period a year ago. The decrease was due
primarily from less costs for contracted outside product development.
Other income, net was $28,000, virtually unchanged from the first quarter of
1996.
The Company expects to avail itself of an operating loss carryforward and incur
no income tax expense in 1997.
Liquidity and Capital Resources:
The Company completed an initial public offering in June 1995 with the sale of
990,000 shares of common stock, receiving net proceeds of approximately $3.9
million. The proceeds are being used for the expansion of the business and the
unused portion is currently held in interest-bearing cash equivalents.
Cash used in operations was $142,000 for the first quarter of 1997, compared to
$623,000 for the same period in 1996. The improvement in cash flow from
operations was primarily due to net income for the first quarter of 1997 of
$5,000 compared to a net loss of $577,000 for the first quarter of 1996.
Capital expenditures were $30,000 for the first quarter of 1997, compared to
$43,000 for the same period in 1996. The Company does not expect to make
significant changes to the level of investments in capital expenditures for the
balance of 1997.
Management believes that its cash and investment position, anticipated cash
flows from operations, and funds available through its bank line of credit will
be sufficient to meet working capital requirements for current operations and
planned new product introductions for the foreseeable future.
Factors Affecting Future Performance:
Periodically in reports filed with the Securities and Exchange Commission, in
press releases, and in other communications to shareholders and the investing
public, the Company may make statements regarding the Company's future financial
performance. Such forward looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected, including the ability and willingness of governmental agencies
responsible for roadway planning to invest in Autoscope machine vision
technology for advanced traffic management, the impact of new products
introduced by competitors, and higher than expected expenses to complete the
development of new products and to establish a worldwide marketing presence.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports
No reports on Form 8-K were filed during the quarter covered by this
Form 10-QSB
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Image Sensing Systems, Inc.
(Registrant)
Dated: May 5, 1997 /s/ Spiro G. Voglis
Spiro G. Voglis
President and Chief Executive Officer
(principal executive officer)
Dated: May 5, 1997 /s/ Arthur J. Bourgeois
Arthur J. Bourgeois
Chief Financial Officer
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,522,000
<SECURITIES> 0
<RECEIVABLES> 1,096,000
<ALLOWANCES> 48,000
<INVENTORY> 70,000
<CURRENT-ASSETS> 2,665,000
<PP&E> 972,000
<DEPRECIATION> 371,000
<TOTAL-ASSETS> 3,266,000
<CURRENT-LIABILITIES> 585,000
<BONDS> 0
0
0
<COMMON> 25,000
<OTHER-SE> 2,620,000
<TOTAL-LIABILITY-AND-EQUITY> 3,266,000
<SALES> 352,000
<TOTAL-REVENUES> 905,000
<CGS> 165,000
<TOTAL-COSTS> 928,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,000
<EPS-PRIMARY> 0
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