8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 Or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)  June 21, 2010

Image Sensing Systems, Inc.

(Exact name of registrant as specified in its charter)

Minnesota	0-26056	41-1519168
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
500 Spruce Tree Centre, 1600 University Avenue West, St. Paul, Minnesota		55104
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code  (651) 603-7700

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This amendment is being filed to amend and supplement Item 9.01 of Current Report on Form 8-K filed by Image Sensing Systems, Inc. on June 23, 2011, to include the financial statements and pro forma financial information described in Item 9.01 below.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

          (a) Financial Statements of Business Acquired. The audited consolidated financial statements of CitySync Limited (“CitySync”) as of January 31, 2010 and the year then ended are filed as Exhibit 99.1 to this amendment.

          The unaudited consolidated balance sheet and profit and loss account of CitySync as of and for the three months ended April 30, 2010 are filed as Exhibit 99.2 to this amendment.

          (b) Pro Forma Financial Information. The pro forma financial information as of December 31, 2009 and the year then ended and the three months ended March 31, 2010 is filed as Exhibit 99.3 to this amendment.

          (c) Exhibits. The following documents are hereby filed as exhibits to this Current Report on Form 8-K:

Exhibit No.
23.1	Consent of Raffingers Stuart, Registered Auditors.
99.1	Audited consolidated financial statements of CitySync as of January 31, 2010 and the year then ended.
99.2	Unaudited consolidated balance sheet and profit and loss account of CitySync as of April 30, 2010 and for the three months ended April 30, 2010 and 2009.
99.3	Unaudited pro forma condensed combined financial statements.

2

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.

Dated: August 4, 2010	Image Sensing Systems, Inc.
	By:	/s/ Gregory R. L. Smith
		Gregory R. L. Smith
		Chief Financial Officer
		(Principal Financial Officer)

3

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of Raffingers Stuart, Registered Auditors.
99.1	Audited consolidated financial statements of CitySync as of January 31, 2010 and the year then ended.
99.2	Unaudited consolidated balance sheet and profit and loss account of CitySync as of April 30, 2010 and for the three months ended April 30, 2010 and 2009.
99.3	Unaudited pro forma condensed combined financial statements.

4

EX-23.1

Exhibit 23.1

CONSENT OF REGISTERED AUDITORS

          We have issued our report dated 27 May 2010 accompanying the consolidated financial statements of CitySync Limited for the year ended 31 January 2010 included in this Current Report on Form 8-K/A. We hereby consent to the incorporation by reference of said report in the Registration Statements of Image Sensing Systems, Inc. and subsidiaries on Forms S-8 (File No. 333-167496, effective June 14, 2010; File No. 333-165303, effective March 8, 2010; File No. 333-152217, effective July 3, 2008; File No. 333-142449, effective April 30, 2007; File No. 333-82546, effective February 11, 2002 File No. 333-86169, effective August 30, 1999; and File No. 333-09289, effective July 31, 1996) and on Forms S-3 (File No. 333-162810, effective November 18, 2009; and File No. 333-41706, effective July 19, 2000).

/s/Raffingers Stuart

Woodford Green, Essex, United Kingdom
4 August 2010

EX-99.1

Exhibit 99.1

REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JANUARY 2010

FOR

CITYSYNC LIMITED

CITYSYNC LIMITED

CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 January 2010

	Page
Company Information	1
Report of the Directors	2
Report of the Independent Auditors	3
Consolidated Profit and Loss Account	4
Consolidated Balance Sheet	5
Company Balance Sheet	6
Notes to the Consolidated Financial Statements	7
Consolidated Trading and Profit and Loss Account	13

CITYSYNC LIMITED

COMPANY INFORMATION
for the year ended 31 January 2010

DIRECTORS:	Mr N Bekooy
	Mr L J Noble
	Mr F Thomson
SECRETARY:	Mr L J Noble
REGISTERED OFFICE:	CityPark
	Swiftfields
	Welwyn Garden City
	Hertfordshire
	AL7 1LY
REGISTERED NUMBER:	03791347 (England and Wales)
AUDITORS:	Raffingers Stuart
	Chartered Certified Accountants
	Registered Auditors
	19-20 Bourne Court
	Southend Road
	Woodford Green
	Essex
	IG8 8HD

Page 1

CITYSYNC LIMITED

REPORT OF THE DIRECTORS
for the year ended 31 January 2010

The directors present their report with the financial statements of the company and the group for the year ended 31 January 2010.

PRINCIPAL ACTIVITY
The principal activity of the group in the year under review was that of the development of automatic number plate recognition software.

DIRECTORS
The directors shown below have held office during the whole of the period from 1 February 2009 to the date of this report.

Mr N Bekooy
Mr L J Noble
Mr F Thomson

STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and accounting estimates that are reasonable and prudent;

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s and the group’s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group’s auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group’s auditors are aware of that information.

This report has been prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating to small companies.

ON BEHALF OF THE BOARD:

/s/ F. Thomson

Mr F Thomson - Director

26 May 2010

Page 2

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
CITYSYNC LIMITED

We have audited the financial statements of Citysync Limited for the year ended 31 January 2010 on pages four to twelve. The financial reporting framework that has been applied in their preparation is applicable law and the Financial Reporting Standard for Smaller Entities (effective April 2008) (United Kingdom Generally Accepted Accounting Practice applicable to Smaller Entities).

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page two, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements
In our opinion:

- the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 January 2010 and of the group’s loss for the year then ended;

- the group financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice applicable to Smaller Entities; and

- have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

- the parent company financial statements are not in agreement with the accounting records and returns; or

- certain disclosures of directors’ remuneration specified by law are not made; or

- we have not received all the information and explanations we require for our audit; or

- the directors were not entitled to prepare the financial statements and the Report of the Directors in accordance with the small companies regime.

/s/ T. Beeharry

Mr T Beeharry (Senior Statutory Auditor)
for and on behalf of Raffingers Stuart
Chartered Certified Accountants
Registered Auditors
19-20 Bourne Court
Southend Road
Woodford Green
Essex
IG8 8HD

27 May 2010

Page 3

CITYSYNC LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 January 2010

	Notes	£
TURNOVER			4,724,630
Cost of sales			2,326,770
GROSS PROFIT			2,397,860
Administrative expenses			2,397,758
OPERATING PROFIT	2		102
Settlement of patent lawsuit	3		(56,278	)
Legal costs for patent lawsuit	3		(18,759	)
Patents and licences written off	3		(136,387	)
			(211,424	)
Interest payable and similar charges			41,427
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION			(252,749	)
Tax on loss on ordinary activities	4		(21,358	)
LOSS FOR THE FINANCIAL YEAR AFTER TAXATION			(231,391	)

The notes form part of these financial statements

Page 4

CITYSYNC LIMITED

CONSOLIDATED BALANCE SHEET
31 January 2010

	Notes	£		£
FIXED ASSETS
Intangible assets	6				192,332
Tangible assets	7				121,924
Investments	8				—
					314,256
CURRENT ASSETS
Stocks			466,100
Debtors	9		1,298,264
Cash at bank and in hand			1,439
			1,765,803
CREDITORS
Amounts falling due within one year	10		1,550,786
NET CURRENT ASSETS					215,017
TOTAL ASSETS LESS CURRENT LIABILITIES					529,273
CREDITORS
Amounts falling due after more than one year	11				299,710
NET ASSETS					229,563
CAPITAL AND RESERVES
Called up share capital	14				15,000
Profit and loss account	15				214,563
SHAREHOLDERS’ FUNDS					229,563

The financial statements have been prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating to small companies and with the Financial Reporting Standard for Smaller Entities (effective April 2008).

The financial statements were approved by the Board of Directors on 26 May 2010 and were signed on its behalf by:

/s/ F. Thomson

Mr F Thomson - Director

The notes form part of these financial statements

Page 5

CITYSYNC LIMITED

COMPANY BALANCE SHEET
31 January 2010

	Notes	£		£
FIXED ASSETS
Intangible assets	6				192,332
Tangible assets	7				120,893
Investments	8				938
					314,163
CURRENT ASSETS
Stocks			377,297
Debtors	9		1,567,260
Cash at bank and in hand			1,423
			1,945,980
CREDITORS
Amounts falling due within one year	10		1,531,249
NET CURRENT ASSETS					414,731
TOTAL ASSETS LESS CURRENT LIABILITIES					728,894
CREDITORS
Amounts falling due after more than one year	11				299,710
NET ASSETS					429,184
CAPITAL AND RESERVES
Called up share capital	14				15,000
Profit and loss account	15				414,184
SHAREHOLDERS’ FUNDS					429,184

The financial statements have been prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating to small companies and with the Financial Reporting Standard for Smaller Entities (effective April 2008).

The financial statements were approved by the Board of Directors on 26 May 2010 and were signed on its behalf by:

/s/ F. Thomson

Mr F Thomson - Director

The notes form part of these financial statements

Page 6

CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 January 2010

1.	ACCOUNTING POLICIES
	Accounting convention
	The financial statements have been prepared under the historical cost convention and in accordance with the Financial Reporting Standard for Smaller Entities (effective April 2008).
	Turnover
	Turnover represents net invoiced sales of goods, excluding value added tax.
	Intangible fixed assets
	Development costs are being written off over four years.
	Tangible fixed assets
	Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Improvements to property	- over the period of the leases
Plant and machinery	- 25% on reducing balance
Fixtures and fittings	- 25% on reducing balance
Motor vehicles	- 25% on reducing balance
Computer equipment	- 25% on reducing balance

	Stocks
	Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.
	Deferred tax
	Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.
	Foreign currencies
	Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.
	Hire purchase and leasing commitments
	Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.
	The interest element of these obligations is charged to the profit and loss account over the relevant period. The capital element of the future payments is treated as a liability.
	Rentals paid under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease.
	Pension costs and other post-retirement benefits
	The group operates a defined contribution pension scheme. Contributions payable to the group’s pension scheme are charged to the profit and loss account in the period to which they relate.
2.	OPERATING LOSS
	The operating loss is stated after charging:

	£
Depreciation - owned assets	29,969
Depreciation - assets on hire purchase contracts	10,466
Development costs amortisation	64,111
Auditors’ remuneration	5,000
Foreign exchange differences	22,704
Directors’ remuneration and other benefits etc	280,800

3.	EXCEPTIONAL ITEMS
	A provision of £56,278 has been made at the balance sheet date for settlement of a patent lawsuit in USA. A provision of £18,759 has also been made for legal costs relating to this matter.
	Patents and licence costs to the value of £136,387 were written off during the year.

Page 7 continued…

CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
for the year ended 31 January 2010

4.	TAXATION
	Analysis of the tax credit
	The tax credit on the loss on ordinary activities for the year was as follows:

	£
Current tax:
UK corporation tax	(29,102	)
US tax	7,744
Tax on loss on ordinary activities	(21,358	)

5.	LOSS OF PARENT COMPANY
	As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company’s loss for the financial year was £(59,602).
6.	INTANGIBLE FIXED ASSETS

Group
	Patents and licences £		Development costs £	Totals £
COST
At 1 February 2009	117,138		425,213	542,351
Additions	46,549		30,489	77,038
Disposals	(163,687	)	—	(163,687	)
At 31 January 2010	—		455,702	455,702
AMORTISATION
At 1 February 2009	27,300		199,259	226,559
Amortisation for year	—		64,111	64,111
Eliminated on disposal	(27,300	)	—	(27,300	)
At 31 January 2010	—		263,370	263,370
NET BOOK VALUE
At 31 January 2010	—		192,332	192,332
At 31 January 2009	89,838		225,954	315,792

Company
	Patents and licences £		Development costs £	Totals £
COST
At 1 February 2009	117,138		425,213	542,351
Additions	46,549		30,489	77,038
Disposals	(163,687	)	—	(163,687	)
At 31 January 2010	—		455,702	455,702
AMORTISATION
At 1 February 2009	27,300		199,259	226,559
Amortisation for year	—		64,111	64,111
Eliminated on disposal	(27,300	)	—	(27,300	)
At 31 January 2010	—		263,370	263,370
NET BOOK VALUE
At 31 January 2010	—		192,332	192,332
At 31 January 2009	89,838		225,954	315,792

Page 8 continued…

CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
for the year ended 31 January 2010

7. TANGIBLE FIXED ASSETS

Group
	Improvements to property £	Plant and machinery £	Fixtures and fittings £
COST
At 1 February 2009	42,864	157,657	18,862
Additions	19,327	—	7,189
At 31 January 2010	62,191	157,657	26,051
DEPRECIATION
At 1 February 2009	22,937	113,548	15,626
Charge for year	6,780	11,521	2,942
At 31 January 2010	29,717	125,069	18,568
NET BOOK VALUE
At 31 January 2010	32,474	32,588	7,483
At 31 January 2009	19,927	44,109	3,236
	Motor vehicles £	Computer equipment £	Totals £
COST
At 1 February 2009	7,093	56,768	283,244
Additions	35,884	8,045	70,445
At 31 January 2010	42,977	64,813	353,689
DEPRECIATION
At 1 February 2009	292	38,927	191,330
Charge for year	12,243	6,949	40,435
At 31 January 2010	12,535	45,876	231,765
NET BOOK VALUE
At 31 January 2010	30,442	18,937	121,924
At 31 January 2009	6,801	17,841	91,914
Fixed assets, included in the above, which are held under hire purchase contracts are as follows:
			Motor vehicles £
COST
Additions			35,884
At 31 January 2010			35,884
DEPRECIATION
Charge for year			10,466
At 31 January 2010			10,466
NET BOOK VALUE
At 31 January 2010			25,418

Page 9 continued…

CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
for the year ended 31 January 2010

7. TANGIBLE FIXED ASSETS - continued

Company
	Improvements to property £	Plant and machinery £	Fixtures and fittings £
COST
At 1 February 2009	42,864	157,657	18,862
Additions	19,327	—	7,189
At 31 January 2010	62,191	157,657	26,051
DEPRECIATION
At 1 February 2009	22,937	113,548	15,626
Charge for year	6,780	11,521	2,942
At 31 January 2010	29,717	125,069	18,568
NET BOOK VALUE
At 31 January 2010	32,474	32,588	7,483
At 31 January 2009	19,927	44,109	3,236
	Motor vehicles £	Computer equipment £	Totals £
COST
At 1 February 2009	7,093	56,768	283,244
Additions	35,884	6,671	69,071
At 31 January 2010	42,977	63,439	352,315
DEPRECIATION
At 1 February 2009	292	38,927	191,330
Charge for year	12,243	6,606	40,092
At 31 January 2010	12,535	45,533	231,422
NET BOOK VALUE
At 31 January 2010	30,442	17,906	120,893
At 31 January 2009	6,801	17,841	91,914
Fixed assets, included in the above, which are held under hire purchase contracts are as follows:
			Motor vehicles £
COST
Additions			35,884
At 31 January 2010			35,884
DEPRECIATION
Charge for year			10,466
At 31 January 2010			10,466
NET BOOK VALUE
At 31 January 2010			25,418

Page 10 continued…

CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
for the year ended 31 January 2010

8. FIXED ASSET INVESTMENTS

Company	Shares in group undertakings £
COST
Additions		938
At 31 January 2010		938
NET BOOK VALUE
At 31 January 2010		938

The group or the company’s investments at the balance sheet date in the share capital of companies include the following:

Subsidiary
Citysync Technologies Inc
Country of incorporation: United States of America
Nature of business: Number plate recognition software
	%
Class of shares:	holding
Common stock	100.00
		£
Aggregate capital and reserves		(194,288	)
Loss for the year		(167,393	)

9. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

	Group £	Company £
Trade debtors	1,188,523	1,112,127
Amounts owed by group undertakings	—	347,881
Other debtors	109,741	107,252
	1,298,264	1,567,260

10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

	Group £	Company £
Bank loans and overdrafts	571,133	571,133
Hire purchase contracts	4,710	4,710
Trade creditors	629,974	617,085
Taxation and social security	74,113	67,465
Other creditors	270,856	270,856
	1,550,786	1,531,249

11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

	Group	Company
	£	£
Hire purchase contracts	4,710	4,710
Other creditors	295,000	295,000
	299,710	299,710

Page 11 continued...

CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
for the year ended 31 January 2010

12.	OPERATING LEASE COMMITMENTS
	The following operating lease payments are committed to be paid within one year:

	Group £	Company £
Expiring:
Within one year	1,379	1,379
Between one and five years	74,054	74,054
In more than five years	50,000	50,000
	125,433	125,433

13.	SECURED DEBTS
	The following secured debts are included within creditors:

	Group £	Company £
Hire purchase contracts	9,420	9,420

14. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:
Number:	Class:	Nominal value:	£
15,000	Ordinary	£1	15,000

15. RESERVES

Group
	Profit and loss account £
At 1 February 2009	445,954
Deficit for the year	(231,391	)
At 31 January 2010	214,563
Company
	Profit and loss account £
At 1 February 2009	473,786
Deficit for the year	(59,602	)
At 31 January 2010	414,184

16.	RELATED PARTY DISCLOSURES
	The group was controlled throughout the current year by the directors, Mr N Bekooy, Mr L J Noble and Mr F Thomson, by virtue of their ownership of 60% of the issued share capital. At the balance sheet date the company owed the directors £60,000.
	At the balance sheet date the group owed £235,000 to shareholders controlling the remaining 40% of the issued share capital.

Page 12

CITYSYNC LIMITED

CONSOLIDATED TRADING AND PROFIT AND LOSS ACCOUNT
for the year ended 31 January 2010

	£		£
Turnover
Sales	4,516,647
Export sales	207,983
			4,724,630
Cost of sales
Opening stock	174,898
Purchases	2,617,972
	2,792,870
Closing stock	(466,100	)
			2,326,770
GROSS PROFIT			2,397,860
Expenditure
Hire of plant and machinery	5,251
Rent and rates	43,077
Insurance	43,822
Light and heat	3,815
Repairs to property	4,417
Directors’ salaries	280,800
Directors’ pensions paid	17,861
Wages	869,467
Social security	141,961
Sales promotion	109,242
Telephone	43,828
Post and stationery	19,156
Travelling and entertainment	202,717
Motor expenses	127,472
Maintenance and repairs	8,305
Cleaning	955
Refreshments	6,383
Sundry expenses	2,380
Recruitment expenses	18,966
Training costs	105
Accountancy	52,301
Legal and professional	49,918
Auditors’ remuneration	5,000
Subscriptions and donations	3,439
Foreign exchange losses	22,704
Commission paid	59,642
Bad debts	84,390
			2,227,374
			170,486
Finance costs
Bank charges	65,838
Bank interest	66
Loan interest	37,367
Hire purchase	1,038
Other interest	2,956
			107,265
Carried forward			63,221

This page does not form part of the statutory financial statements

Page 13

CITYSYNC LIMITED

CONSOLIDATED TRADING AND PROFIT AND LOSS ACCOUNT
for the year ended 31 January 2010

	£	£
Brought forward	63,221
Depreciation
Development costs	64,111
Improvements to property	6,780
Plant and machinery	11,521
Fixtures and fittings	2,942
Motor vehicles	12,243
Computer equipment	6,949
		104,546
		(41,325	)
Exceptional items
Settlement of patent lawsuit	56,278
Legal costs for patent lawsuit	18,759
Patents and licences written off	136,387
		211,424
NET LOSS		(252,749	)

This page does not form part of the statutory financial statements

Page 14

EX-99.2

Exhibit 99.2

CITYSYNC LIMITED

CONSOLIDATED BALANCE SHEET (unaudited)
30 April 2010
(£ in 000s)

	£	£
FIXED ASSETS
Intangible assets		176
Tangible assets		173
		349
CURRENT ASSETS
Stocks	495
Debtors	1,315
Cash at bank and in hand	79
	1,889
CREDITORS
Amounts falling due within one year	1,980
NET CURRENT LIABILITIES		91
NET ASSETS		258
CAPITAL AND RESERVES
Called up share capital		15
Profit and loss account		243
SHAREHOLDERS’ FUNDS		258

The notes form part of these financial statements.

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CITYSYNC LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT (unaudited)
for the three months ended 30 April 2010 and 2009
(£ in 000s)

	2010		2009
	£		£
TURNOVER	946		615
Cost of sales	342		327
GROSS PROFIT	604		288
Administrative expenses	603		577
OPERATING PROFIT (LOSS)	1		(289	)
Interest payable and similar charges	25		17
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION	(24	)	(306	)
Taxes	(58	)
INCOME (LOSS) FOR THE PERIOD AFTER TAXATION	34		(306	)

The notes form part of these financial statements.

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CITYSYNC LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Interim, unaudited)

This interim consolidated financial information the three months ended 30 April 2010 was approved by the Directors on 8 June 2010.

1.	BASIS OF PREPARATION
	The accounting policies applied are consistent with those described in the Report of the Directors and Consolidated Financial Statements for the year ended 31 January 2010 and this interim consolidated information should be read in conjunction with that report.
	This interim consolidated financial information is not audited and does not comprise statutory financial statements.  The Report of the Directors and Consolidated Financial Statements for the year ended 31 January 2010 were approved by the Directors on 26 May 2010.  The report of the auditors on those financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
2.	TAXATION
	A benefit has been realized for a revised estimate under the U.K Research and Development (R&D) tax credit regime.  The benefit relates to activity in the year ended 31 January 2010.
3.	TANGIBLE FIXED ASSETS

	Totals £ (000)
COST
At 1 February 2010		354
Additions		61
At 30 April 2010		415
DEPRECIATION
At 1 February 2010		232
Charge for period		10
At 30 April 2010		242
NET BOOK VALUE
At 30 April 2010		173
At 31 January 2010		122

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EX-99

Exhibit 99.3

Unaudited Pro Forma Condensed Combined Financial Statements

          On June 21, 2010, Image Sensing Systems, Inc. (the “Company”) and Image Sensing Systems Europe Limited, which is the Company’s wholly-owned subsidiary based in the United Kingdom (“ISS Europe”), entered into and closed on a Share Purchase Agreement (the “Purchase Agreement”) with three shareholders (the “Sellers”) of CitySync Limited (“CitySync”) under which ISS Europe purchased all of the shareholders’ ordinary shares of CitySync. Also on June 21, 2010, the Company exercised its options (the “Options”) granted to it by the two other shareholders of CitySync to purchase the remaining ordinary shares of CitySync. CitySync, based in Hertfordshire, United Kingdom, is a privately-held developer and marketer of automated license (or number) plate reader technology.

          Under the Purchase Agreement and the Options, the Company and ISS Europe paid total initial consideration of $7.9 million in cash and issued 57,000 restricted shares of the Company’s common stock (valued at $727,000 based on its closing price on June 18, 2010 as quoted on The NASDAQ Capital Market). Under the Purchase Agreement, the shares of Company common stock were placed in escrow (the “Escrowed Shares”). The Purchase Agreement provides for earn-out payments (the “Earn-Out Payments”) over approximately 18 months, broken into two periods. If revenue and gross margin from sales of the CitySync products are at the highest target tiers, ISS Europe is obligated to pay to the Sellers $2.0 million cash in Earn-Out Payments for the two earn-out periods; however, the amount of the Earn-Out Payments is not capped, and with superior revenue and gross margin achievement, the amount of the Earn-Out Payments could exceed this amount. The Earn-Out Payments are tied to achieving target levels of “Actual Eligible Revenue” and “GM” from sales of the CitySync products. As used in the Purchase Agreement, “Actual Eligible Revenue” means the revenue from products in respect of “Business” earned by the Company, on a consolidated basis. The term “Business” is defined in the Purchase Agreement as the business of developing, marketing, distributing, selling and supporting automatic number plate recognition and automatic license plate recognition hardware and software. The term “GM” is defined as the average associated gross margin earned by the Company on the Actual Eligible Revenue. Depending on the amount of Actual Eligible Revenue and GM for the first earn-out period, the Earn-Out Payment for that period can range from $0 to $767,000 plus an amount equal to 10% of Actual Earned Revenue above that period’s highest target tier. Depending on the amount of Actual Eligible Revenue and GM for the second earn-out period, the Earn-Out Payment for that period can range from $0 to $1,229,000 plus an amount equal to 10% of Actual Earned Revenue above that period’s highest target tier. Any Earn-Out Payments with respect to an earn-out period are due within 90 days after the end of the earn-out period for which the Earn-Out Payment is due. The first earn-out period begins on June 22, 2010 and ends on December 31, 2010, and the second earn-out period begins on January 1, 2011 and ends on December 31, 2011. The Purchase Agreement provides that if the Company or ISS Europe has a judgment in respect of any claim made under the Purchase Agreement against the Sellers, it may set off the amount of such judgment against the Escrowed Shares and the Earn-Out Payments. Any Escrowed Shares remaining in escrow 18 months after June 21, 2010 will then be released to the Sellers. CitySync now is a wholly-owned subsidiary of ISS Europe.

          The following unaudited pro forma condensed combined financial statements present the pro forma effect of the acquisition of CitySync by the Company on the Company’s historical financial position and results of operations using the purchase method of accounting. The fiscal year of the Company ends on December 31 and the fiscal year of CitySync ends on January 31.

          The following unaudited pro forma condensed combined balance sheet as of March 31, 2010 has been derived from the Company’s unaudited consolidated balance sheet as of March 31, 2010 and CitySync’s unaudited consolidated balance sheet as of April 30, 2010 and is presented as if the acquisition had occurred on March 31, 2010.

          The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2009 has been derived from the Company’s audited consolidated statement of operations the year ended December 31, 2009 and CitySync’s audited consolidated profit and loss account for the year ended January 31, 2010 and is presented as if the acquisition had occurred on January 1, 2009.

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          The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2010 has been derived from the Company’s unaudited consolidated statement of operations the three months ended March 31, 2010 and CitySync’s unaudited consolidated profit and loss account for the three months ended April 30, 2010 and is presented as if the acquisition had occurred on January 1, 2009.

          These pro forma condensed combined financial statements should be read in conjunction with the:

• Accompanying notes to the unaudited pro forma condensed combined financial statements included herein;

• separate unaudited historical financial statements of the Company as of and for the three months ended March 31, 2010 included in its Quarterly Report on Form 10-Q and the audited financial statements of the Company as of and for the year ended December 31, 2009 included in its Annual Report on Form 10-K for the year ended December 31, 2009; and

• separate unaudited consolidated balance sheet and profit and loss account of CitySync for the three month period ended April 30, 2010 and the audited consolidated financial statements of CitySync as of and for the year ended January 31, 2010 included in this Current Report on Form 8-K/A.

          Pursuant to the purchase method of accounting, the total estimated purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their respective fair values as of June 21, 2010. Any differences between the fair value of the total consideration issued and the fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Because these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values attributable to the assets purchased, the actual amounts recorded may differ materially from the information presented. The Company’s management, with the assistance of a third party valuation firm, has determined the preliminary fair value of the intangible assets at the pro forma balance sheet date of March 31, 2010. Management takes responsibility for the valuation assessment. These allocations are subject to change pending further review of the fair value of the assets acquired.

          The pro forma information is being filed pursuant to the requirements of Item 2 and 9.01 of Form 8-K and Rule 3-05 and Article 11 of U.S. Securities and Exchange Commission (SEC) Regulation S-X and is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company. The pro forma information does not reflect cost savings, operating synergies or revenue enhancements expected to result from the asset purchase or the costs to achieve these cost savings, operating synergies and revenue enhancements. The pro forma adjustments and the allocation of the purchase price are based on management’s estimates of the fair value of the assets acquired in the purchase.

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Unaudited Pro Forma Condensed Combined Balance Sheet
as of March 31, 2010
(in thousands)

	As of March 31, 2010
	Historical					Proforma
	Image Sensing Systems, Inc.			CitySync		Adjustments			Combined
Assets
Current assets:
Cash and cash equivalents	$	12,575		$	119	$	(8,999	)(1)	$	3,695
Investments		3,911			—					3,911
Accounts receivable, net		4,986			1,748					6,734
Inventories		2,979			746					3,725
Prepaid expenses and other		959			233					1,192
Total current assets		25,410			2,846		(8,999	)		19,257
Property and equipment, net		1,013			526		(265	)(2)		1,274
Deferred income taxes		1,485			—					1,485
Goodwill and intangible assets, net		11,146			—		9,483	(3)		20,529
Total assets	$	39,054		$	3,372	$	219		$	42,645
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	403		$	827				$	1,230
Bank and other debt		3,900			1,456	$	(437	)(4)		4,919
Accrued compensation		575			65					640
Accrued warranty and other		721			634		(164	)(4)		1,191
Earnout accrued		—			—		1,010	(5)		1,010
Income taxes payable		54			—					54
Total current liabilities		5,653			2,982		409			9,044
Income taxes payable		186			—					186
Shareholders’ equity:
Common stock		40			23		(22	)(6)		41
Additional paid-in capital		12,135			—		726	(6)		12,861
Accumulated other comprehensive loss		(212	)		—					(212	)
Retained earnings		21,252			367		(894	)(6)		20,725
		33,215			390		(190	)		33,415
Total liabilities and shareholders’ equity	$	39,054		$	3,372	$	219		$	42,645

See accompanying notes to unaudited pro forma condensed combined financial statements

3

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2009
(in thousands, except per share amounts)

	Historical					Proforma
	Image Sensing Systems, Inc.		CitySync			Adjustments				Combined
Revenues
Royalties	$	12,110	$	—		$	—			$	12,110
Product sales		12,483		7,441			—				19,924
		24,593		7,441			—				32,034
Cost of product sales		4,297		3,664			—				7,961
Gross Profit		20,296		3,777			—				24,073
Operating expenses
Selling, marketing and product support		7,201		—			2,209		(7)		9,410
General and administrative		3,779		4,006			(2,861	)	(7)		4,924
Research and development		3,336		—			652		(7)		3,988
Amortization of intangible assets		768		—			813		(8)		1,581
		15,084		4,006			813				19,903
Income (loss) from operations		5,212		(229	)		(813	)			4,170
Other income (expense)		7		(168	)		40		(9)		(121	)
Income (loss) before income taxes		5,219		(397	)		(773	)			4,049
Income tax expense (benefit)		1,354		(33	)		—				1,321
Net income (loss)	$	3,865	$	(364	)	$	(773	)		$	2,728
Net income per common share
Basic	$	0.97								$	0.67
Diluted	$	0.95								$	0.66
Weighted average shares outstanding
Basic		3,985		N/A			57		(10)		4,042
Diluted		4,081		N/A			57		(10)		4,138

See accompanying notes to unaudited pro forma condensed combined financial statements

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Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2010
(in thousands, except per share amounts)

	Historical						Proforma
	Image Sensing Systems, Inc.			CitySync			Adjustments				Combined
Revenues
Royalties	$	2,591		$	—		$	—			$	2,591
Product sales		2,812			1,448			—				4,260
		5,403			1,448			—				6,851
Cost of product sales		932			523			—				1,455
Gross Profit		4,471			925			—				5,396
Operating expenses
Selling, marketing and product support		1,856			—			508		(7)		2,364
General and administrative		1,038			923			(646	)	(7)		1,315
Research and development		777			—			138		(7)		915
Amortization of intangible assets		192			—			203		(8)		395
		3,863			923			203				4,989
Income from operations		608			2			(203	)			407
Other expense		(36	)		(38	)		10		(9)		(64	)
Income (loss) before income taxes		572			(36	)		(193	)			343
Income tax expense (benefit)		170			(89	)		—				81
Net income	$	402		$	53		$	(193	)		$	262
Net income per common share
Basic	$	0.10									$	0.06
Diluted	$	0.10									$	0.06
Weighted average shares outstanding
Basic		3,989			N/A			57		(10)		4,046
Diluted		4,089			N/A			57		(10)		4,146

See accompanying notes to unaudited pro forma condensed combined financial statements

5

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. The Acquisition

          The Company purchased 100% of the outstanding equity of CitySync. As part of the transaction, the Company incurred direct costs of $527,000 for legal, consulting, appraisal and accounting fees and other external costs.

          The following table summarizes the components of the estimated total consideration determined for accounting purposes of these pro forma condensed combined financial statements (in thousands):

Fair value of 57,000 shares of Image Sensing Systems, Inc. common stock issued to sellers	$	727
Cash		7,871
Earnout payments estimated		1,010
Net purchase price	$	9,608

          The purchase consideration was allocated based on the estimated fair value of the tangible and identifiable intangible assets acquired. An allocation of the purchase price has been made to major categories of assets in the accompanying unaudited pro forma condensed combined financial statements based on management’s best estimates. The excess of the purchase price over the estimated fair value of tangible and identifiable intangible assets acquired has been allocated to goodwill.

          The preliminary allocation of the purchase consideration based on the balance sheet of CitySync as of March 31, 2010 and a valuation of the assets acquired as of June 21, 2010 is presented below (in thousands):

Fair value of CitySync tangible assets net of liabilities	$	125
Identifiable intangible assets:
Developed technology		3,300
Trade names		1,900
Other		1,500
Total identifiable intangible assets		6,700
Goodwill		2,783
Total purchase price	$	9,608

          Identifiable intangible assets – The fair value of the existing technology was based on a valuation that considered, among other factors, the expected income and discounted cash flows to be generated from such existing technology, taking into account risks related to the characteristics and applications of the technology and assessments of the life cycle state of the technology. The value of the existing technology is being amortized over an eight year period. The fair value of the trade names was based on a third-party valuation that considered, among other factors, the expected income and discounted cash flows to be generated from such trade names, also taking into account the expected period in which the Company intends to utilize the trade names. The value of the trade names is being amortized over a nine year period. Other identifiable intangible assets are being amortized over periods ranging from three to eight years.

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          Goodwill – Goodwill represents the excess of the estimated purchase price over the estimated fair value of tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill is not amortized but rather is tested for impairment at least annually. In the event that the Company determines that the value of goodwill has become impaired, it will incur a charge for the amount of impairment at the time in which such determination is made.

2. Pro Forma Adjustments

          The unaudited pro forma condensed combined balance sheet gives effect to the asset purchase as if it had occurred on March 31, 2010. The unaudited pro forma condensed combined statement of operations gives effect to the asset purchase as if it had occurred on January 1, 2009. With regards to the historical CitySync information, the balance sheet is as of April 30, 2010 and the statement of operations is for the year ended January 31, 2010 and the three months ended April 30, 2010, as applicable.

          Explanations of the adjustments to the unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of operations are as follows (in thousands):

(1) Adjustments to cash and cash equivalents (in thousands):

To record cash portion of transaction price and related transaction expenses	$	(7,871	)
To record transaction costs		(527	)
To record Sellers loan repayments including accrued interest		(601	)
Total	$	(8,999	)

(2) Adjustment made to eliminate capitalized software development costs in property and equipment. The value of the software development is considered in the valuation of intangible assets.

(3) To record the transaction goodwill and intangible assets as shown above in Note 1 - The Acquisition.

(4) To record repayment of Sellers loans, including accrued interest, to CitySync that were repaid in conjunction with the closing.

(5) To record management’s estimate of earnout anticipated to be paid to the Sellers under the Purchase Agreement.

(6) Adjustments to shareholders’ equity (in thousands):

To record ISS common stock issued to CitySync sellers	$	1
To record additional paid-in capital for ISS common stock issued		726
To eliminate CitySync equity		(23	)
To eliminate CitySync retained earnings		(367	)
To record retained earnings impact of transaction costs		(527	)
Total	$	(190	)

(7) To allocate CitySync operating costs to each of the functional expense line items.

(8) To record amortization expense on intangible assets recognized in the transaction.

(9) To reduce interest expense related to Sellers loans.

(10) The pro forma number of shares used in per share calculations reflects the 57,000 common shares of the Company issued to the Sellers upon closing as partial consideration for the equity purchased.

7