# Exhibit 99.1

| | 500 Spruce Tree Centre
1600 University Avenue WestSt. 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 Second Quarter Financial Results

Saint Paul, Minn., July 26, 2006Image Sensing Systems, Inc.
(ISS) (NASDAQ: ISNS), announced today financial results for its second quarter ended June 30, 2006.

Net income for the quarter increased 40.2% to $855,000 ($0.22 per fully
diluted share) from $610,000 ($0.16 per fully diluted share) for the comparable period in 2005, while net income for the first
half of 2006 increased 34.9% to $1,358,000 ($0.35 per fully diluted share) from $1,007,000 ($0.26 per fully diluted share) for the
comparable period in 2005.

Revenues for the second quarter were $3,406,000, a 34.9% increase from
$2,524,000 for the comparable period in fiscal 2005, while revenues for the first half of 2006 were $5,995,000, a 28.9% increase
from $4,651,000 for the comparable period a year ago. Revenue from royalty income increased 19.3% to $2,508,000 from $2,102,000 in
the second quarter of 2005 and increased 23.3% to $4,684,000 from $3,799,000 in the first half of 2005 and reflects the continuing
success that ISSs North American distributor, Econolite Control Products, Inc., is having selling the companys
Autoscope products in the United States. International sales for the second quarter of 2006 increased 112.8% to $898,000 from
$422,000 for the comparable quarter in 2005 and increased 53.9% to $1,311,000 in the first half of fiscal 2006 from $852,000 in
the comparable period of 2005. The significant increases in both the second quarter and first half of 2006 were due to two large
sales to an Asian distributor in the second quarter. Operating expenses for the quarter were $1,873,000, a 34.7% increase from
$1,391,000 in 2005 while operating expenses for the first half of fiscal 2006 increased 33.1% to $3,539,000 from $2,659,000 in
fiscal 2005.

---

Jim Murdakes, Chairman and CEO said, Our international sales for the
second quarter more than made up for a flat first quarter mainly due to recent success in the Asian market. Royalty income from
our North American partner, Econolite Control Products, Inc., continues to grow in parallel with their increased sales of our
Autoscope products and is now 23.3% ahead of last year. Operating expenses have increased as planned as we added technical
personnel and infrastructure in the first half of 2006 to support our current and planned growth in revenue and technology
advancements.

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 Form 10-KSB for
the year ended December 31, 2005.

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Image Sensing Systems, Inc.
Condensed Statement of Income
(in thousands, except per share information):

|                                       | Three-Month PeriodsEnded June 30 |  | Six-Month PeriodsEnded June 30
|-------------------------------------- | -------------------------------- |  | ------------------------------
|
|Revenue                                |                                  |  |                               
|Royalty income                         |                                  |  | $                             
|International sales                    |                                  |  |                               
|                                       |                                  |  |                               
|                                       |                                  |  |                               
|Cost of revenue                       
|Royalty expense                        |                                  |  |                               
|Cost of sales                          |                                  |  |                               
|                                       |                                  |  |                               
|                                       |                                  |  |                               
|                                       |                                  |  |                               
|Gross profit                           |                                  |  |                               
|Operating expenses                     |                                  | 
|Selling, marketing and product support |                                  |  |                               
|General and administrative             |                                  |  |                               
|Research and development               |                                  |  |                               
|                                       |                                  |  |                               
|                                       |                                  |  |                               
|                                       |                                  |  |                               
|Income from operations                 |                                  |  |                               
|Other income                           |                                  |  |                               
|                                       |                                  |  |                               
|Income before income taxes             |                                  |  |                               
|Income taxes                           |                                  |  |                               
|                                       |                                  |  |                               
|Net income                             |                                  |  | $                             
|                                       |                                  |  |                               
|                                      
|Net income per common share            |                                  | 
|Basic                                  |                                  |  | $                             
|Diluted                                |                                  |  | $                             
|                                      
|Weighted average shares outstanding    |                                  | 
|Basic                                  |                                  |  |                               
|Diluted                                |                                  |  |                               

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Image Sensing Systems, Inc.
Condensed Balance Sheet
(in thousands)

|                                                         | June 30,2006 |  | December 31,2005
|-------------------------------------------------------- | ------------ |  | ----------------
|Assets                                                   |              |  |                 
|Current assets                                           |              | 
|Cash and cash equivalents                                |              |  | $               
|Investments                                              |              |  |                 
|Receivables                                              |              |  |                 
|Inventories                                              |              |  |                 
|Prepaid expenses and deferred taxes                      |              |  |                 
|                                                         |              |  |                 
|                                                         |              |  |                 
|Property and equipment, net                              |              |  |                 
|Goodwill and capitalized software development costs, net |              |  |                 
|                                                         |              |  |                 
|                                                         |              |  | $               
|                                                         |              |  |                 
|Liabilities and Shareowners Equity                      |              | 
|Current liabilities                                     
|Accounts payable and accrued expenses                    |              |  | $               
|Income taxes payable                                     |              |  |                 
|                                                         |              |  |                 
|                                                         |              |  |                 
|Deferred income taxes                                    |              |  |                 
|Shareholders equity                                     |              |  |                 
|                                                         |              |  |                 
|                                                         |              |  | $               
|                                                         |              |  |                 

---

Image Sensing Systems, Inc.
Condensed Statement of Cash Flows
(in thousands)

|                                                             | Six Month Periods EndedJune 30
|------------------------------------------------------------ | ------------------------------
|
|Operating activities                                         |                               
|Net income                                                   |                               
|Adjustments to reconcile net income to net cash provided by 
|operations                                                  
|Depreciation and amortization                                |                               
|Changes in operating assets and liabilities                  |                               
|                                                             |                               
|Net cash provided by operating activities                    |                               
|                                                            
|Investing activities                                        
|Purchase of property and equipment                           |                               
|Sale (purchase) of short-term investments                    |                               
|                                                             |                               
|Net cash provided by (used in) investing activities          |                               
|                                                            
|Financing activity  proceeds from exercise of stock options |                               
|                                                             |                               
|                                                            
|Increase in cash and cash equivalents                        |                               
|Cash and cash equivalents, beginning of period               |                               
|                                                             |                               
|Cash and cash equivalents, end of period                     |                               
|                                                             |                               

###

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