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FOR IMMEDIATE RELEASE
For further information, call
Bonnie Herron, Intelligent Systems
       770/564-5504

bherron@intelsys.com

 INTELLIGENT SYSTEMS ANNOUNCES
SECOND QUARTER 2007 RESULTS

 Norcross, GA – August 13, 2007 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today the financial results for its second quarter and year-to-date periods ended June 30, 2007. 

                 In the quarter ended June 30, 2007, total revenue was $3.9 million compared to total revenue of $3.6 million in the quarter ended June 30, 2006, an increase of 9 percent.  Revenue from product sales in the second quarter of 2007 was $2.6 million, a 10 percent increase over the second quarter of 2006, while revenue from services grew by 6 percent to $1.3 million in the quarter ended June 30, 2007 compared to $1.2 million in the second quarter of 2006.

                 For the six month period ended June 30, 2007, total revenue was $7.9 million compared to $8.4 million in the six month period in 2006.  In 2007, year-to-date product revenue grew by 35 percent year-over-year to $5.7 million.  However, year-to-date service revenue in 2007 declined to $2.2 million compared to $4.2 million in the six month period ended June 30, 2006.

                The period-to-period increase in product revenue in both the three and six month periods ended June 30, 2007 reflects strong growth in sales of the ChemFree subsidiary products, as well as new license revenue recognized by the CoreCard Software subsidiary in the first quarter of 2007.  The decline in 2007 year-to-date services revenue is mainly due to an unusually large $1.8 million multi-year software services contract that was recognized in the first quarter of 2006.  

                Net loss for the second quarter of 2007 was $922,000 ($0.21 per basic and diluted share) compared to a net loss of $776,000 ($0.17 per basic and diluted share) for the corresponding period in 2006.  For the six month period ended June 30, 2007, net loss was $1.1 million ($0.24 per basic and diluted share) compared to a net loss of $1.2 million ($0.27 per basic and diluted share) in the comparable period in 2006.

                As previously disclosed, as a result of the sale of the company’s QS Technologies business in July of 2006, the company classified the QS business as Discontinued Operations and the financial results for 2006 have been reclassified to conform to this presentation.  In the six month period ended June 30, 2007, the company reported an additional gain of $97,000 on the sale of the QS discontinued operations following completion of an earn-out period in which there were no proposed adjustments by the buyer.

The company expects to file its Form 10-QSB for the quarter ended June 30, 2007 with the Securities and Exchange by the end of the day today.  For additional information about the company’s reported results, investors will be able to access the Form 10-QSB on the company’s website at www.intelsys.com or at the SEC site, www.sec.gov.   In keeping with prior practice, the company will schedule investor conference calls from time to time as appropriate and will announce future conference calls in advance.

 About Intelligent Systems Corporation

For over thirty years, Intelligent Systems Corporation [AMEX: INS] has identified, created, operated and grown early stage technology companies.  The company has operations and investments in the information technology and industrial products industries.  The company’s consolidated subsidiaries include VISaer, Inc. (www.visaer.com), CoreCard Software, Inc. (www.corecard.com), (both software companies) and ChemFree Corporation (www.chemfree.com) (an industrial products company).  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, 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 rising gas prices that could impact the aviation industry, the price of certain plastics components and the company’s other worldwide market opportunities, other geopolitical or military actions, and general economic conditions, particularly those that cause businesses to delay or cancel purchase decisions.

 CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except share and per share amounts)

 

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2007

2006

2007

2006

Revenue

 

 

 

 

   Products

$ 2,573

$ 2,340

$ 5,659

$ 4,192

   Services

1,284

1,213

2,247

4,237

    Total revenue

3,857

3,553

7,906

8,429

Cost of revenue

 

 

 

 

   Products

1,496

1,227

2,566

2,227

   Services

781

532

1,353

1,965

    Total cost of revenue

2,277

1,759

3,919

4,192

Expenses

 

 

 

 

    Marketing

590

512

1,027

1,032

    General & administrative

918

863

1,898

1,966

    Research & development

1,164

1,368

2,428

2,889

Loss from operations

(1,092)

(949)

(1,366)

(1,650)

Other income (expense)

 

 

 

 

    Interest income (expense), net

34

(33)

97

(61)

    Investment income, net

92

2

82

7

    Equity in income of affiliate companies

41

91

42

162

    Other income (loss), net

3

3

(7)

38

Loss before income taxes

(922)

(886)

(1,152)

(1,504)

Income from discontinued operations

-- 

110

-- 

283

Gain on sale of discontinued operations

-- 

-- 

97

-- 

Net  loss

$ (922)

$ (776)

$ (1,055)

$ (1,221)

 

 

 

 

 

Loss per share from continuing operations

         $ (0.21)

       $ (0.19)

       $ (0.26)

      $ (0.33)

Income per share from discontinued operations

               0.00  

             0.02

             0.02

            0.06

Net loss per share:       Basic & diluted

         $ (0.21)

       $ (0.17)

       $ (0.24)

      $ (0.27)

Basic and diluted weighted average common shares outstanding

4,478,971

4,478,971

4,478,971

4,478,971

 

 

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

June 30, 2007

December 31, 2006

 

 

ASSETS

(Unaudited)

 

 

 

Current assets:

 

 

 

  Cash

$  2,338

$  2,136

 

  Accounts receivable, net

2,828

2,006

 

  Notes and interest receivable, current portion

521

3,445

 

  Inventories

1,112

904

 

  Other current assets

482

1,072

 

    Total current assets

7,281

9,563

 

Long-term investments

1,216

1,174

 

Notes receivable, net of current portion

600

841

 

 

Property and equipment, net

1,468

1,009

 

 

Goodwill, net

2,047

2,047

 

 

Other intangibles, net

336

359

 

 

Other assets, net

17

17

 

 

Total assets

$ 12,965

$ 15,010

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

  Note payable

$     221

$          --

 

 

  Accounts payable

  1,558

 1,558

 

 

  Deferred revenue

2,051

3,094

 

 

  Accrued payroll

931

974

 

 

  Accrued expenses and other current liabilities

1,061

1,088

 

 

    Total current liabilities

5,822

6,714

 

 

Other long-term liabilities

257

356

 

 

Minority interest

1,516

1,516

 

Total stockholders’ equity

5,370

6,424

 

 

Total liabilities and stockholders’ equity

$ 12,965

$ 15,010

 

               

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