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Letter to Shareholders


Dear Fellow Shareholders:

 As we enter 2003 – your company’s 30th anniversary – we reflect on a long history of creating and growing technology-focused businesses with a view to building value in these companies over time.  The results of the past three years are fairly typical of the results of our strategy – including two years of solid profitability in which we were able to quantify the underlying value of our companies and a third year with significant losses as we invested for the future.

 In 2002, our consolidated revenue was $10.7 million, a 23 percent increase over 2001, reflecting both increased domestic demand for products and services provided by our ChemFree and QS Technologies subsidiaries and the consolidation of our VISaer subsidiary for the full year in 2002 as compared to only six months in 2001.  Our loss for the year was $12.3 million as compared with a net profit of $9.1 million in 2001. Last year, our 2001 results included a gain of $17.8 million on the sale of our interest in a former affiliate company, PaySys International, Inc.  We view much of the operating loss in 2002 as a long-term investment – almost 70 percent ($8.5 million) was spent on product development at our CoreCard Software and VISaer subsidiaries to create next-generation products from which we expect to derive real value in future periods.  While the investment was substantial, it resulted in tremendous progress in meeting our software development milestones, in large part due to the enthusiasm, dedication and long, long hours invested by our employees.

As you know, our financial results are not consistent and predictable on a quarterly and annual basis because we often consolidate losses associated with early stage companies.  While we expect that our losses from current operations will decline over the course of 2003, we will continue to be conservative in revenue recognition and to invest in product development and sales activities based on what we believe to be the best long-term benefit for the company. 

 Our 2002 results include a net investment loss of $934,000 reflecting investment gains totaling $1.5 million offset by write-downs totaling $2.4 million related to our minority interests in several companies, as explained in more detail in Note 3 to our Consolidated Financial Statements.  In 2002, the tough funding and business environment continued to impact the viability and valuations of emerging technology companies and their circumstances can change quickly and unpredictably, as we experienced in 2002.  We will continue to take appropriate and prompt action if it appears that an investment has suffered a permanent impairment in value.

 I would encourage you to read our Form 10-K for a detailed description of our operating subsidiaries and the trends and risks associated with our businesses.  The following are just a few highlights:

  • VISaer completed the first release of its Web-native software product that allows operators and third party service providers to handle the complex business and regulatory requirements of the maintenance, repair and overhaul functions of airline operations.  Growing international opportunities are evident, contracts with customers such as UPS and JetBlue are encouraging, and milestone payments by customers in advance of revenue recognition help reduce cash requirements.  The extent to which the war against Iraq will impact the worldwide airline industry is unclear but we assume and are planning for a negative affect on VISaer’s near-term acquisition of new business. 

  • CoreCard Software completed the initial version of its CoreISSUEäand CoreENGINEä products, which help accounts receivable companies, banks, lending institutions and retailers manage their customer accounts and credit transactions.  With multi-lingual, multi-currency, real-time processing capabilities running on NT and Unix machines, CoreCard’s software combines Web flexibility, rich features and lower overall cost of ownership.  As with most new software companies, CoreCard’s key challenge and focus in 2003 is to secure referenceable customer installations.

  • QS Technologies, with a long history of providing software products and services to public health agencies, is entering 2003 with a solid base of new contracts, recurring maintenance revenue and a growing prospect pipeline. We expect QS Technologies to make a positive contribution to our 2003 results.

  • ChemFree’s revenue grew by over 20 percent in 2002 as ChemFree benefited from positive industry trends.  With an increase in the number of local and state authorities that are banning solvent-based parts cleaners and the growing interest from automotive repair chains for safer, more environmentally sensitive cleaning solutions, new opportunities are opening up for non-hazardous, bio-remediating parts washer systems such as ChemFree’s SmartWasherâ

 The investments we made in 2002 for product and market development used significant cash resources.  In addition to cash on hand at December 31, 2002, we have recently settled the escrow fund related to the 2001 PaySys sale, which will provide us with approximately $4.4 million in cash in 2003.  Our budgeted cash requirements for 2003 are substantially lower than for 2002 based on new and pending software license contracts at our software subsidiaries, anticipated software customer payments based on milestone achievements, and lower product development costs at VISaer and CoreCard.  We believe the company has adequate cash to support our current plans and operations and we will carefully manage our resources in these uncertain times, as we have over the past 30 years.

 J. Leland Strange
President and Chief Executive Officer