<PAGE>

                                                                    EXHIBIT 99.1

                              CAUTIONARY STATEMENT

         Image Sensing Systems, Inc. wishes to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 and
is filing this cautionary statement in connection with this Act. Our annual
report on Form 10-KSB, our Annual Report to Shareholders, any quarterly report
on Form 10-QSB or current report on Form 8-K, or any other written or oral
statements made by us or on our behalf may include forward-looking statement
that reflect our current views with respect to future events and financial
performance. The words "believe," "expect," "may," "will," "should," "intend,"
"plan," "estimate," or "anticipate" and other comparable terminology identify
forward-looking statements. Forward-looking statements are subject to risks and
uncertainties that may cause our actual results to differ materially from the
results discussed in the forward-looking statements. Some factors that might
cause these differences include the factors listed below. Although we have
attempted to list these factors comprehensively, we wish to caution investors
that other factors may prove to be important in the future and may affect our
operating results. New factors may emerge from time to time, and it is not
possible to predict all of these factors, nor can we assess the affect each
factor or combination of factors may have on our business.

         We further caution you not to unduly rely on any forward-looking
statements, because they reflect our views only as of the date the statements
were made. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

                                  RISK FACTORS

         WE ARE DEPENDENT ON A SINGLE PRODUCT FOR MOST OF OUR REVENUE, AND IF WE
DO NOT INCREASE THE MARKET FOR OUR PRODUCT, WE WILL BE UNABLE TO BE PROFITABLE
AND OUR BUSINESS WILL BE HARMED.

         More than 80% of our revenue since inception has been generated from
sales of, or royalties from the sales of, the Autoscope(R) system vehicle
detection system, and the Autoscope system currently is our only product sold
commercially. The application of machine vision technology to traffic management
is a relatively new concept in the traffic management industry. Our financial
success and prospects for growth will depend in large part on the continued
development of the market for advanced technology solutions for traffic
management and the acceptance of the Autoscope system as a reliable,
cost-effective alternative to traditional vehicle detection systems. We cannot
assure you that a sustainable market will develop for the Autoscope system or
that, if a sustainable market does not develop, we will be able to utilize our
technology profitably in other products or markets. If the Autoscope system does
not gain greater market acceptance and if we are unable to increase awareness of
our product and expand our customer base, sales of our products will suffer and
we may be unable to sustain our business.

IF GOVERNMENTAL ENTITIES ELECT NOT TO USE OUR PRODUCT DUE TO BUDGETARY
CONSTRAINTS, PROJECT DELAYS OR OTHER REASONS, OUR REVENUES MAY FLUCTUATE
SEVERELY OR BE SUBSTANTIALLY DIMINISHED.

         We sell the Autoscope system primarily to governmental entities for use
in large traffic control projects using advanced traffic control technologies.
Unless and until broader market acceptance of the Autoscope system is achieved,
we will continue to rely substantially on revenues and royalties from sales of
the Autoscope system to governmental entities. It often takes considerable time
before governmental traffic control projects are developed to the point where a
purchase of the Autoscope system is made, and a purchase of our product also may
be subject to a time-consuming approval process. Additionally, governmental
budgets and plans may change without warning. Substantial delays in purchase
decisions by governmental entities, or governmental budgetary constraints, could
cause our revenues and income to drop substantially or to fluctuate
significantly between fiscal periods.

IF OUR PRIMARY DISTRIBUTOR FAILS TO PAY ROYALTIES TO US IN A TIMELY MANNER OR AT
ALL, OUR FINANCIAL RESULTS WILL SUFFER.

         We have entered into an agreement with Econolite Control Products,
Inc., pursuant to which Econolite is the exclusive distributor of the Autoscope
system in North America and Latin America. In exchange for its right to
distribute our product, Econolite pays us royalties for sales of the Autoscope
system. Since 1991, more than 60% of
<PAGE>

our revenue has consisted of royalties resulting from sales made by Econolite. A
failure by Econolite to make royalty payments to us in a timely manner or at all
will significantly reduce our revenues and harm our financial condition.

OUR DEPENDENCE ON THIRD PARTIES FOR MANUFACTURING AND MARKETING OUR PRODUCT MAY
PREVENT US FROM MEETING CUSTOMERS' NEEDS IN A TIMELY MANNER.

         We do not have, and do not intend to develop in the near future, the
capability to manufacture our products. We have entered into agreements with
Econolite Control Products, Inc. and Wireless Technology Inc. (WTI) to
manufacture the Autoscope system and related technology. If Econolite and WTI
are unable to manufacture our products in the future, we may be unable to
identify other manufacturers able to meet product and quality demands in a
timely manner or at all. Our inability to find suitable manufacturers for our
products could result in delays or reductions in product shipments, which in
turn may harm our business reputation and results of operations. In addition, we
have granted Econolite the exclusive right to market the Autoscope system and
related products in North America and Latin America. Consequently, our revenues
depend to a significant extent on Econolite's marketing efforts. Econolite's
inability to effectively market the Autoscope system, or the disruption or
termination of that relationship, could result in reduced revenues and market
share for our products.

OUR DEPENDENCE ON SINGLE-SOURCE SUPPLIERS AND SPECIALIZED SUPPLIERS MAY PREVENT
US FROM MEETING CUSTOMERS' NEEDS IN A TIMELY MANNER.

         Some of the component hardware incorporated into the Autoscope system,
such as the supervisor computer and the video monitor, are standard computer
hardware products that are available from multiple sources. Other parts, such as
the microprocessor and digitizer, are manufactured to our specifications by
third-party vendors for integration into the system. If current vendors of
components for the Autoscope system fail to meet quality and performance
expectations, and if alternative component vendors are unavailable, shortages of
parts or the need to change vendors could limit our ability to manufacture the
Autoscope system, which would harm our business reputation and financial
results.

WE MAY FACE INCREASED COMPETITION IF WE FAIL TO ADEQUATELY PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS, AND EFFORTS TO PROTECT OUR INTELLECTUAL PROPERTY
RIGHTS MAY RESULT IN COSTLY LITIGATION.

         Our success depends in large measure on the protection of our
proprietary technology rights. We rely on trade secret, copyright and trademark
laws, patents and confidentiality agreements with employees and third parties,
all of which offer only limited protection. We cannot assure you that the scope
of any current or future patents relating to our products will exclude
competitors or provide competitive advantages to us, or that the current patent
on the technology underlying the Autoscope system will be held valid if
challenged. We also cannot assure you that others have not developed or will not
develop similar products, duplicate any of our products or design around our
patents. The reverse engineering, unauthorized copying or other misappropriation
of our proprietary technology could enable third parties to benefit from our
technology without paying us for it. This could adversely affect our business
and financial results. Litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Litigation could result
in substantial costs and the diversion of management resources, either of which
could harm our business.

         We have not applied for patent protection in all foreign countries in
which we may market and sell the Autoscope system. Consequently, our proprietary
rights in the technology underlying the Autoscope system will be protected only
to the extent that trade secret, copyright or other non-patent protection is
available in other countries and to the extent we are able to enforce our rights
in those countries. The laws of other countries in which we market our products
may afford little or no effective protection of our proprietary technology.

         The U.S. and foreign patents for certain aspects of the underlying
technology for the Autoscope system are owned by the University of Minnesota. We
have entered into a license agreement with the University of Minnesota, pursuant
to which we have been granted an exclusive, worldwide license, with a right to
grant sub-licenses, to make, have made, use, sell and lease products
incorporating the Autoscope technology, and we pay royalties to the University
for this license. The University of Minnesota may terminate the license only in
limited circumstances,



<PAGE>

but any termination would prevent us from developing and selling our products
and therefore would severely disrupt our business operations.

INCREASED COMPETITION MAY MAKE IT DIFFICULT FOR US TO ACQUIRE AND RETAIN
CUSTOMERS, AND IF WE ARE UNSUCCESSFUL IN DEVELOPING NEW APPLICATIONS AND PRODUCT
ENHANCEMENTS, OUR PRODUCTS MAY BECOME OBSOLETE.

         Competition in the area of advanced traffic management and surveillance
is growing. Some of the companies that may compete with us in the business of
developing and implementing traffic control systems have substantially more
financial, technological, marketing, personnel and research and development
resources than we have. Therefore, they may be able to respond more quickly than
we can to new or changing opportunities, technologies, standards or customer
requirements. If we are unable to compete successfully with these companies, the
market share for our products will decrease, and competitive pressures may
seriously harm our business.

         Additionally, the market for adaptive technology for vehicle detection
is continuously seeking more advanced technological solutions to traffic
management and control problems. Technologies such as embedded loop detectors,
pressure plates, pneumatic tubes, radars, lasers, magnetometers, acoustics, and
microwaves that have been used as traffic sensing devices in the past will be
enhanced for use in the traffic management industry, and new technologies may be
developed. We are aware of several companies that are developing traffic
management devices using machine vision technology or other advanced technology.
We expect that we increasingly will face competitive product developments,
applications and enhancements. New technologies or applications in traffic
control systems may provide our customers with alternatives to the Autoscope
system and could render our products or technologies noncompetitive or obsolete.
If we are unable to increase the number of our applications and develop and
commercialize product enhancements and applications in a timely manner that
respond to changing technology and satisfy the needs of our customers, our
business and financial results will suffer. We cannot be certain that we will be
successful in developing and marketing product enhancements or new products on a
timely or cost-effective basis or that these products, if developed, will
achieve market acceptance.

OUR INABILITY TO MANAGE GROWTH EFFECTIVELY COULD SERIOUSLY HARM OUR BUSINESS.

         Growth and expansion of our business could significantly strain our
capital resources as well as the time and abilities of our management personnel.
Our ability to manage growth effectively will require continued improvement of
our operational, financial and management systems, and successful training,
motivation and management of our employees. If we are unable to manage growth
successfully, our business and operating results will suffer.

THE SIGNIFICANT CONTROL OVER SHAREHOLDER VOTING MATTERS THAT MAY BE EXERCISED BY
OUR DIRECTORS AND OFFICERS MAY DEPRIVE OTHER SHAREHOLDERS OF THE ABILITY TO
INFLUENCE CORPORATE ACTIONS.

                  As of March 21, 2003, our directors and officers owned
beneficially approximately 45% of our outstanding common stock. Accordingly,
these shareholders may be able to influence the outcome of shareholder votes,
including votes concerning the election of directors and the outcome of
corporate actions requiring shareholder approval, such as mergers and
acquisitions, regardless of how other shareholders may vote. This concentration
of voting control among our officers and directors may result in the deferral,
prevention or significant delay in a change in management or change in control
of Image Sensing Systems and may constrain the voting or other rights of other
holders of our common stock.

OUR BUSINESS OPERATIONS WILL BE SEVERELY DISRUPTED IF WE LOSE KEY PERSONNEL OR
IF WE FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL.

         Our technology is dependent upon the knowledge, experience, and skills
of key scientific and technical personnel. Additionally, our ability to continue
technological developments and to market our products, and thereby develop a
competitive edge in the marketplace, depends in large part on our ability to
attract and retain qualified scientific and technical personnel. Competition for
qualified personnel is intense, and we cannot assure you that we will be able to
attract and retain the individuals we need. The loss of key personnel, or our
inability to hire and retain qualified personnel, will harm our business.


<PAGE>


CONDITIONS BEYOND OUR CONTROL COULD SERIOUSLY HARM OUR BUSINESS.

         Terrorists' attacks against Econolite or WTI would adversely effect
manufacture of our Autoscope products and delay the delivery of sales orders.
War could also affect our ability to sell products internationally and to
deliver product in a timely manner. Economic recession or depression could also
affect government entities and their ability to expend funds for transportation
improvements. These and other factors beyond our control could seriously reduce
our revenues and earnings.