Image Sensing Systems Inc. (ISNS, Financial) filed Quarterly Report for the period ended 2009-03-31.
Image Sensing Systems Inc. develops and markets products using video image processing technology for use in advanced traffic management systems and traffic data collection to reduce congestion and improve roadway planning. Also known as machine vision or artificial vision video image processing uses video cameras and computers to emulate the function of the human eye and is used in a variety of industrial applications. ISS has also created a system that collects processes and analyzes video images. Image Sensing Systems Inc. has a market cap of $35.3 million; its shares were traded at around $8.87 with a P/E ratio of 8 and P/S ratio of 1.4. Image Sensing Systems Inc. had an annual average earning growth of 5.4% over the past 5 years.
General and administrative expense increased to $975,000, or 20.4% of total revenue, in the first quarter of 2009, up from $888,000, or 15.1% of total revenue, in the same period in 2008. The 2009 increase in costs resulted mainly from increased professional services expenses. We anticipate that for the remainder of 2009, the dollar amount of our quarterly general and administrative expense will remain at levels similar to that of the first quarter of 2009.
Amortization of intangibles expense was $192,000 in the first quarter of 2009 and reflects the amortization of intangible assets acquired in the EIS asset purchase. Assuming there are no changes to our intangible assets, we anticipate amortization expense will be $768,000 for all of 2009.
At March 31, 2009, we had $10.9 million in cash and cash equivalents, compared to $10.3 million in cash and cash equivalents and $4.0 million in short-term investments at December 31, 2008. Our investments held at December 31, 2008 were auction rate securities that were redeemed at par in January 2009.
Net cash provided by operating activities was $1.6 million in 2009, compared to $1.2 million in 2008. The increase in 2009 was mainly a result of decreasing receivable balances as opposed to the activity in 2008. We anticipate that average receivable collection days in 2009 will increase over 2008 but that it will not have a material impact on our liquidity. Our planned additions of property and equipment are discretionary, and we do not expect them to exceed historical levels in 2009. In addition to equipment purchases, in 2009 we paid our 2008 earn-out liability of $1.2 million to the sellers of the EIS assets. We also retired our bank debt in full in February 2009, paying a total of $3.75 million during the quarter ended March 31, 2009.
In conjunction with our EIS asset purchase, the sellers have an earn-out arrangement over approximately three years from the December 2007 date of purchase. The earn-out is based on earnings from RTMS sales less related cost of revenue and operating expenses, depreciation and amortization, and it is calculated annually. If the earnings are at target levels, the sellers would receive $2.0 million annually, or $6.0 million in total. Superior performance of the assets could lead to an earn-out in excess of $2 million, as the earn-out is not capped. Earn-out payments generally are due within three months of the end of an earn-out period. The first earn-out period ran from December 6, 2007 to December 31, 2008. Based on the results for RTMS for the first earn-out period, which ended December 31, 2008, the sellers of the EIS assets were entitled to receive a $1.2 million earn-out payment, which was paid in March and April 2009. If we are acquired or sell substantially all of our assets before December 6, 2010, we must pay EIS $6.0 million less earn-out amounts previously paid as an acceleration of potential earn-out payments under the EIS asset purchase agreement.
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Image Sensing Systems Inc. develops and markets products using video image processing technology for use in advanced traffic management systems and traffic data collection to reduce congestion and improve roadway planning. Also known as machine vision or artificial vision video image processing uses video cameras and computers to emulate the function of the human eye and is used in a variety of industrial applications. ISS has also created a system that collects processes and analyzes video images. Image Sensing Systems Inc. has a market cap of $35.3 million; its shares were traded at around $8.87 with a P/E ratio of 8 and P/S ratio of 1.4. Image Sensing Systems Inc. had an annual average earning growth of 5.4% over the past 5 years.
Highlight of Business Operations:
Total revenue decreased to $4.8 million in the three-month period ended March 31, 2009 from $5.9 million in the same period in 2008, a decrease of 18.4%. Royalties decreased to $2.3 million in the first quarter of 2009 from $2.9 million in the same period in 2008, a decrease of 20.6%. We attribute the decrease in royalties to the economic recession in North America and its negative impact on state and federal spending. North American sales, which are sales of RTMS in North America, decreased to $1.3 million, or 27.4% of revenue, in the first quarter of 2009 from $1.6 million, or 27.7% of revenue, in the same period in 2008, also reflecting the difficult economic environment in North America. International sales, which include both Autoscope and RTMS sales outside of North America, decreased to $1.2 million in the first quarter of 2009 from $1.4 million in the first quarter of 2008, a decrease of 12.8%. The first quarter of 2008 was unusually strong for international sales.General and administrative expense increased to $975,000, or 20.4% of total revenue, in the first quarter of 2009, up from $888,000, or 15.1% of total revenue, in the same period in 2008. The 2009 increase in costs resulted mainly from increased professional services expenses. We anticipate that for the remainder of 2009, the dollar amount of our quarterly general and administrative expense will remain at levels similar to that of the first quarter of 2009.
Amortization of intangibles expense was $192,000 in the first quarter of 2009 and reflects the amortization of intangible assets acquired in the EIS asset purchase. Assuming there are no changes to our intangible assets, we anticipate amortization expense will be $768,000 for all of 2009.
At March 31, 2009, we had $10.9 million in cash and cash equivalents, compared to $10.3 million in cash and cash equivalents and $4.0 million in short-term investments at December 31, 2008. Our investments held at December 31, 2008 were auction rate securities that were redeemed at par in January 2009.
Net cash provided by operating activities was $1.6 million in 2009, compared to $1.2 million in 2008. The increase in 2009 was mainly a result of decreasing receivable balances as opposed to the activity in 2008. We anticipate that average receivable collection days in 2009 will increase over 2008 but that it will not have a material impact on our liquidity. Our planned additions of property and equipment are discretionary, and we do not expect them to exceed historical levels in 2009. In addition to equipment purchases, in 2009 we paid our 2008 earn-out liability of $1.2 million to the sellers of the EIS assets. We also retired our bank debt in full in February 2009, paying a total of $3.75 million during the quarter ended March 31, 2009.
In conjunction with our EIS asset purchase, the sellers have an earn-out arrangement over approximately three years from the December 2007 date of purchase. The earn-out is based on earnings from RTMS sales less related cost of revenue and operating expenses, depreciation and amortization, and it is calculated annually. If the earnings are at target levels, the sellers would receive $2.0 million annually, or $6.0 million in total. Superior performance of the assets could lead to an earn-out in excess of $2 million, as the earn-out is not capped. Earn-out payments generally are due within three months of the end of an earn-out period. The first earn-out period ran from December 6, 2007 to December 31, 2008. Based on the results for RTMS for the first earn-out period, which ended December 31, 2008, the sellers of the EIS assets were entitled to receive a $1.2 million earn-out payment, which was paid in March and April 2009. If we are acquired or sell substantially all of our assets before December 6, 2010, we must pay EIS $6.0 million less earn-out amounts previously paid as an acceleration of potential earn-out payments under the EIS asset purchase agreement.
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