8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 22, 2004

IMAGE SENSING SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Minnesota
(State or Other Jurisdiction of Incorporation)

0-26056	41-1519168
(Commission File Number)	(IRS Employer Identification No.)

500 Spruce Tree Centre, 1600 University Avenue, St. Paul, Minnesota 55104
(Address of Principal Executive Offices, Including Zip Code)

(651) 603-7700
(Registrant's Telephone Number, Including Area Code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Item 7.  Financial Statements and Exhibits.

        (c)    The following exhibit is being “furnished” in accordance with Item 12 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing:

        99.1  Press Release, dated July 22, 2004, of Image Sensing Systems, Inc.

Item 12.  Results of Operations and Financial Condition.

        The following information is being “furnished” in accordance with Item 12 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing:

On July 22, 2004, Image Sensing Systems, Inc. issued a press release to report the Company’s results of operations and financial condition for the completed fiscal quarter ended June 30, 2004. The press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

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 hereunto duly authorized.

IMAGE SENSING SYSTEMS, INC.

By: /s/ James Murdakes        

James Murdakes
Chief Executive Officer

Dated: July 22, 2004.

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release, dated July 22, 2004, of Image Sensing Systems, Inc.

EX-99.1

EXHIBIT 99.1

500 Spruce Tree Centre
1600 University Avenue West
St. Paul, Minnesota 55104-3825 USA
651.603.7700 Fax: 651.603.7795
www.imagesensing.com

NEWS RELEASE

Contacts: Art Bourgeois, Chief Financial Officer
Image Sensing Systems, Inc. Phone: 651.603.7700

FOR IMMEDIATE RELEASE

Image Sensing Systems Announces Record Second Quarter Financial Results

Saint Paul, Minn.,- July 22, 2004-Image Sensing Systems, Inc. (NASDAQ Small Cap: ISNS) market leading developer and manufacturer of video-based traffic management systems, announced today continued record financial results for its second quarter ended June 30, 2004, marking the ninth consecutive quarter with net income exceeding net income reported for the comparable quarter of the previous year.

Net income for the quarter was $979,000 ($0.26 per fully diluted share), an 18.4% increase compared with net income of $827,000 ($0.24 per fully diluted share) for the comparable period in 2003. Net income for the six month period ended June 30, 2004 was $1,299,000 ($0.34 per fully diluted share), a 20.5% increase compared to net income of $1,078,000 ($0.31 per fully diluted share) for the same period a year ago.

Jim Murdakes, Chairman and CEO said, “We are obviously pleased with the ninth consecutive quarter of consistent growth in revenues and net income. While achieving these milestones, during the first half of the year, we also committed to building new products required to sustain our growth both in the near and long term. As we commit to new technologies, we will manage our expenses to continue achieving our financial goals.”

Murdakes added, “Revenues for both the second quarter and the first half of 2004 were 32% above those for comparable periods in 2003. The significant increase in revenue was derived from all three major markets, (North America, Europe & Asia). The revenue mix between international product sales and North American royalties was most gratifying and reflects the importance of a balanced performance through meeting customer requirements across our three major markets. While meeting those diverse needs we have been able to continue to grow the business and remain profitable.”

Headquartered in St. Paul, Minnesota, Image Sensing Systems, Inc. combines expertise in image processing, hardware and software engineering, and communications to develop video vehicle detection systems for traffic management and control applications. The Autoscope vehicle detection system is the world leader in video detection for advanced traffic management systems for highways, tunnel incident detection, intersection control, and traffic data collection. The Autoscope system provides traffic managers the means to reduce roadway congestion, improve roadway planning, and improve cost efficiencies.

Safe Harbor Statement: Statements made in this release concerning the Company’s or management’s intentions, expectations, or predictions about future results or events are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management’s current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. Factors that could produce such a variation include, but are not limited to, the following: the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the Company’s control; developments in the demand for the Company’s products and services; relationships with the Company’s major customers and suppliers; unanticipated delays, costs and expenses inherent in the development and marketing of new products and services; the impact of governmental laws and regulations; and competitive factors. Our forward-looking statements speak only as of the time made, and we assume no obligation to publicly update any such statements. Additional information concerning these and other factors that could cause actual results and events to differ materially from the Company’s current expectations are contained in the Company’s Form10-KSB for the year ended December 31, 2003.

Results for the three- and six-month periods ended June 30, 2004 and 2003 are as follows: (in thousands, except per share information)

	Three-Month Period ended June 30				Six-Month Period ended June 30
	2004		2003		2004		2003
Revenue	$	3,428	$	2,597	$	5,501	$	4,153
Operating income		1,438		1,074		1,902		1,397
Net income		979		827		1,299		1,078
Net income per share
Basic		.29		.26		.39		.34
Diluted		.26		.24		.34		.31
Weighted average number of common shares outstanding
Basic		3,402		3,182		3,347		3,180
Diluted		3,817		3,475		3,789		3,464

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