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FOR IMMEDIATE RELEASE

For further information, call
Bonnie Herron, 770/564-5504
or email to bherron@intelsys.com

INTELLIGENT SYSTEMS ANNOUNCES THIRD QUARTER 2003 RESULTS

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

 Norcross, GA – November 7, 2003 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today its financial results for the third quarter and year-to-date periods ended September 30, 2003.

             For the nine-month period ended September 30, 2003, Intelligent Systems recorded revenue of $8.7 million, a 19 percent increase compared to the same period last year.  Net loss for the nine months ended September 30, 2003 was $3.6 million or $0.81 per share compared to a net loss of $9.5 million or $2.12 for the nine month period in 2002.

             For the three months ended September 30, 2003, the company recorded revenue of $2.7 million, an 8 percent decline compared to revenue of $3.0 million for the same period in 2002.  Net loss for the three-month period in 2003 was $2.4 million or $0.53 per share, 11 percent less than the net loss of $2.7 million or $0.60 per share recorded in the third quarter of 2002. 

            The increase in revenue in the year-to-date period of 2003 compared to last year reflects an increase in service revenue (which includes professional services and software maintenance revenue) at the company’s VISaer and QS Technologies subsidiaries as well as a higher volume of product sales at the company’s ChemFree subsidiary. 

            The results for the year-to-date period ended September 30, 2003 include net investment income of $3.6 million.  In the first half of the year, the company recognized investment income totaling $4.5 million on the settlement of an escrow fund related to the sale in April 2001 of an affiliate company, PaySys International, Inc. to First Data Corporation.  Offset against this income was a first-quarter write-down aggregating $719,000 against the carrying value of the company’s equity and debt investment in a private technology company, a second-quarter charge of $76,000 to reduce the carrying value of another minority owned start-up company and a third quarter loss of $24,000 on the sale of securities.

            The reduction in the net losses reported in the year-to-date period in 2003 compared to the same period last year is a combination of a 19 percent increase in revenue, a 15 percent reduction in consolidated operating expenses, and the non-recurring investment gain on the escrow settlement.  The loss from operations in the three and nine month periods ended September 30, 2003 was $2.5 million and $7.7 million, respectively, which is a reduction of 12 percent and 23 percent, respectively, compared to the same periods last year, mainly due to a reduction in operating expenses.

            In the first nine months of 2003, the company continued to support investment in product development activities at both its CoreCard Software and VISaer subsidiaries for new software products.  While the company is incurring significant product development costs in 2003 at these subsidiaries, license revenue related to the new software products will not be recognized until 2004 at the earliest when customer installations are complete.  At September 30, 2003, the company had $3.9 million in current deferred revenue comprised of amounts recorded by its four consolidated subsidiaries and $4.6 million in non-current deferred revenue associated with its VISaer subsidiary.

Conference Call and Webcast Information

            As announced previously, 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 period for 2003.  The call-in number is 877-226-7144 (domestic) and 706-679-3941 (international).  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 12 months.

About Intelligent Systems Corporation

For thirty 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 include VISaer, Inc. (www.visaer.com), QS Technologies, Inc. (www.qsinc.com), CoreCard Software, Inc. (www.corecard.com), (all software companies) and ChemFree Corporation (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 at 770/381-2900.

In addition to historical information, this news release may contain forward-looking statements relating to Intelligent Systems and its subsidiary and affiliated companies. These statements include all statements that are not statements of historical fact regarding the intent, belief or expectations of Intelligent Systems and its management with respect to, among other things, results of operations, product plans, and financial condition.  The words "may," "will," "anticipate," "believe," "intend," "expect," "estimate," "plan," "strategy" and similar expressions are intended to identify forward-looking statements.  Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those contemplated by such forward-looking statements. 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 from those indicated by such forward-looking statements are delays in product development, undetected software errors, competitive pressures (including pricing), changes in customers’ requirements or financial condition, market acceptance of products and services, changes in financial markets, changes in the performance, financial condition or valuation of affiliate companies, the risks associated with investments in privately-held early stage companies, the impact of events such as the war against IRAQ and the SARS epidemic, on the worldwide commercial aviation industry, other geopolitical or military actions, and general economic conditions, particularly those that cause business or government to delay or cancel purchase decisions.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share amounts)

 

Three Months Ended Sept. 30,

Nine Months Ended Sept. 30,

 

2003

2002

2003

2002

Revenue

 

 

 

 

   Products

$ 1,727

$ 1,849

$ 5,231

$ 4,535

   Services

1,021

1,124

3,508

2,838

    Total revenue

2,748

2,973

8,739

7,373

Cost of revenue

 

 

 

 

   Products

855

889

2,520

2,202

   Services

755

760

2,597

1,839

    Total cost of revenue

1,610

1,649

5,117

4,041

Expenses

 

 

 

 

    Marketing

714

725

2,166

2,123

    General & administrative

883

1,199

2,917

3,545

    Research & development

2,076

2,285

6,256

7,677

Loss from operations

(2,535)

(2,885)

(7,717)

(10,013)

Other income

 

 

 

 

    Interest income (expense), net

9

30

4

107

    Investment income (loss), net

(24)

(360)

3,645a

(902)

    Equity in earnings (losses) of affiliate companies

80

23

47

(103)

    Other income, net

74

133

288

1,035

Loss before income tax provision (benefit)

(2,396)

(3,059)

(3,733)

(9,876)

Income tax provision (benefit)

-- 

(362)

(104)

(350)

Net loss

$ (2,396)

$ (2,697)

$ (3,629)

$ (9,526)

Basic and diluted net loss per share

$   (0.53)

$   (0.60)

$   (0.81)

$   (2.12)

Basic and diluted weighted average shares

4,478,971

4,495,530

4,484,954 

4,495,530

 

a.  Includes $4.5 million gain on escrow settlement offset in part by reserves/losses on investments.

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

September 30,

2003

December 31,

2002

ASSETS

(unaudited)

(audited)

 

Current assets:

 

 

 

  Cash

$ 2,320

$ 2,644

 

  Accounts receivable, net

2,177

3,025

 

  Notes and interest receivable

223

205

 

  Inventories

751

671

 

  Other current assets

219

213

 

    Total current assets

5,690

6,758

 

Long-term investments

6,639

7,145

Property and equipment, at cost less accumulated depreciation

652

761

Goodwill

2,038

2,380

Intangibles, net

554

788

Other assets, net

28

28

Total assets

$ 15,601

$ 17,860

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

  Accounts payable

$ 1,063

$ 1,301

  Deferred revenue

3,897

1,784

  Deferred gain

329

428

  Accrued expenses and other current liabilities

1,925

1,755

    Total current liabilities

7,214

5,268

Deferred revenue, net of current portion

4,590

4,813

Other long-term liabilities

1

27

    Total long term liabilities

4,591

4,840

Minority interest

1,516

1,516

Redeemable preferred stock of subsidiary

-- 

342

Total stockholders’ equity

2,280

5,894

Total liabilities and stockholders’ equity

$ 15,601

$ 17,860

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