Here is an excerpt from our short thesis article on Image Sensing Systems (ISNS) made available to our premium members on 9/3/2014 and published on Seeking Alpha on 9/4/2014.  The excerpt highlights a reality that the size and growth of  one of ISNS’S key target market in the U.S could be limited. We believe it also brings to light the pressure the law enforcement agencies face when deciding where funds in already tight budget will be deployed.  We also conclude that law enforcement will be more inclined to loosen the purse strings for DGLY products.

“The use of video and LPR products and systems has been challenged, limited and banned under existing laws, ordinances and regulations and constitutional provisions protecting privacy rights. In addition, governments and governmental agencies have stopped or suspended their use of LPR systems. For example, Maine, New Jersey and Virginia have laws limiting the use of LPR systems; New Hampshire bans their use; legislation has been proposed in Minnesota limiting the use of data collected by LPR systems; and the Boston Police Department has indefinitely halted its use of LPR systems. In addition, laws, ordinances, regulations and constitutional provisions may be adopted in the future to limit the use of video and LPR products and systems. These existing and new laws, ordinances, regulations and constitutional provisions could negatively affect the acceptance and sale of our video and LPR products and systems and thus have a negative effect on our financial condition and results of operations.”

Many citizens oppose Big Brother spy tactics, but would welcome a product where law enforcement is seemingly held in check.  In a time where budgets are tight, government agencies need to consider this reality when doling out money for law enforcement products.

The appeal of some of DLGY’s law enforcement body worn products is that action is recorded once police officers exit their vehicles making them accountable for their actions. ISNS’s crime/police product is more like a standalone “big brother is watching you product,” with the purpose of reading license plates for data aggregation and analysis. While useful, it is certainly not the new “sexy” explosive growth story DGLY is pitching. We believe this to be an extremely important distinction that investors need to wrap their heads around.

What that Street story didn’t mention, interestingly enough, was petitions being signed for license plate. Conversely, people seem to be opposed to broad types of surveillance, versus the personalized accountability that comes with individual police cameras. We believe this to be the tulip craze all over again.