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  INTELLIGENT SYSTEMS ANNOUNCES THIRD QUARTER 2002 RESULTS

***Earnings Conference Call and Webcast at 11:00 AM Today ***

 Norcross, GA – November 6, 2002 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today its financial results for the three and nine-month periods ended September 30, 2002.

            For the third quarter of 2002, Intelligent Systems recorded revenue of $2,973,000, an increase of 32 percent compared to the third quarter of 2001.  Net loss in the third quarter of 2002 was $2,697,000 or $0.60 per share compared to a net loss of $7,672,000 or $1.63 per share for the same period in 2001.

            The 2002 results are not comparable to the prior year periods for a number of reasons. First, in 2002 the company consolidates the results of CoreCard Software, Inc., a development stage software company, for the full nine-month period in 2002 but not for 2001. Secondly, the company consolidates the results of VISaer, Inc. for both the three and nine month periods of 2002 but only for the third quarter of 2001.  Furthermore, in the third quarter last year, the company recorded $6.4 million in non-cash, non-recurring charges related to the acquisition of VISaer in July 2001.  Finally, in the nine-month period last year, the company recorded non-recurring investment income of $17.8 million on the sale of its ownership in an affiliate company, PaySys International.

            Revenue grew 32 and 34 percent, respectively, in the three and nine-month periods ended September 30, 2002 compared to the same periods in 2001.  The loss from operations in the three and nine month periods of 2002 is in line with the company’s expectations and reflects significant current expenses for research and development at both the CoreCard and VISaer subsidiaries for new software products that will generate revenue in future periods.  The operating losses do not reflect the underlying progress being made at the company’s operating units in 2002.  For example:

·         In the third quarter, the VISaer subsidiary won a contract with JetBlue airlines for VISaer’s new web-native software product, received increases of over $3.5 million to existing customer contracts and expanded its sales pipeline significantly.  VISaer is on schedule for the initial version release of its new software in the fourth quarter this year.  At September 30, 2002, VISaer has accrued over $3.75 million in deferred revenue that is expected to increase and be recognized in 2003 and 2004 when the software is delivered and accepted under various contracts.

·         The ChemFree subsidiary recorded record revenue levels in both the three and nine-month periods due to increased sales of its bioremediating parts washer systems in both the domestic and international markets.

·         The QS Technologies subsidiary grew revenue from new licenses of its public health software and expanded its prospect pipeline compared to the prior year periods.

·         CoreCard Software, a spin-off from PaySys International in 2001, introduced CoreIssueÔ, its global card issuing and real-time transaction processing software, and began installation of its first customer implementation in the third quarter. 

            In the three and nine-month periods of 2002, the company’s results include net investment losses of $360,000 and $902,000, respectively, representing the net effect of gains on sales of investments offset by charges to reduce the carrying value of several of the company’s minority-owned interests.  The 2002 results also include other income of $133,000 and $1,035,000 in the three and nine-month periods, respectively, related to recognition of a deferred gain from a sale transaction in a prior period.  By comparison, as mentioned earlier, the 2001 year-to-date results include a one-time gain of $17.8 million related to the sale of the company’s interest in PaySys International.

Conference Call and Webcast Information

             Intelligent Systems has scheduled a conference call for today at 11 AM EST to discuss the results of the third quarter and year-to-date periods.  The call-in number is 1-800-262-1292; password 253240.  A live webcast will be available at the same time by logging onto www.intelsys.com and clicking on the webcast icon. An archived version of the webcast will be available for 30 days.

 About Intelligent Systems Corporation

 For more than twenty-five years, Intelligent Systems Corporation [AMEX: INS] has identified, created, operated and grown early stage technology companies.  The company has operations and investments, principally in the information technology industry.  The company’s consolidated subsidiaries in 2002 include VISaer (http://www.visaer.com/), QS Technologies (www.qsinc.com), CoreCard Software (http://www.corecard.com/) (all three of which are software companies) and ChemFree (www.chemfree.com)(an industrial products company).  Since 1990, the company has operated the Intelligent Systems Incubator, an award-winning pioneer in privately sponsored incubators.  Further information is available on the company’s website at www.intelsys.com, or by calling the company’s headquarters at 770/381-2900.

In addition to historical information, this news release contains forward-looking statements relating to Intelligent Systems and it subsidiary and affiliated companies.  Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements and the company does not undertake to update or revise any forward-looking statements whether as a result of new developments or otherwise.  Among the factors that could cause actual results to differ materially are changes in financial market conditions, actions of third parties, delays or changes of intent by third parties, delays in product development, competitive pressures, technical difficulties, changes in customer requirements, market acceptance of products and services, availability of capital, availability of qualified personnel, financial results and valuation of affiliate companies, and general economic conditions.

   SUMMARY OF RESULTS

 

Three Months Ended September 30,

                    2002

                   2001

Revenue

            $2,973,000

           $2,257,000

Loss From Operations

             (2,885,000)

            (8,350,000)a

Interest Income

                  30,000

               167,000

Investment Income (Loss), net

               (360,000)

               305,000

Equity in Affiliatese

                  23,000

                (69,000)

Other Income, net

                 133,000d

               278,000

Income Tax Provision (Benefit)

               (362,000)

                   3,000

Net Income (Loss)

           $(2,697,000)

          $(7,672,000)

Average Shares Outstanding – Basic

              4,495,530

             4,693,491

Average Shares Outstanding – Diluted

              4,495,530

             4,693,491

Basic and Diluted Share Income (Loss)

                   $(0.60)

                 $(1.63)

 

 

 

Nine Months Ended September 30,

                    2002

                   2001

Revenue

            $7,354,000

           $5,469,000

Loss From Operations

           (10,013,000)

            (9,172,000)a

Interest Income

                 107,000

               891,000

Investment Income (Loss), net

               (902,000)b

           19,948,000c

Equity in Affiliatese

               (103,000)

              (558,000)

Other Income, net

              1,035,000d

               286,000d

Income Tax Provision (Benefit)

               (350,000)

               387,000

Net Income (Loss)

           $(9,526,000)

         $11,008,000

Average Shares Outstanding – Basic

              4,495,530

             5,312,707

Average Shares Outstanding – Diluted

              4,495,530

             5,315,934

Basic and Diluted Share Income (Loss)

                   $(2.12)

                   $2.07

 

 

 

a.      Includes non-recurring expenses totaling $6.4 million related to VISaer acquisition.

b.      Includes investment gains of $1,474,000 offset by investment losses of $2,377,000.

c.       Includes investment gain of $17.8 million on PaySys sale.

d.      Recognition of deferred gain from sale in prior period.

e.       Reflects pro rata share of net income (loss) of minority-owned affiliate companies accounted for under the equity method.

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