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

bherron@intelsys.com

 INTELLIGENT SYSTEMS ANNOUNCES THIRD QUARTER 2007 RESULTS

 Norcross, GA – November 14, 2007 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today the financial results for its third quarter and year-to-date periods ended September 30, 2007. 

             Total revenue for the three months ended September 30, 2007 was $5.8 million, an increase of 67% compared to the same period in 2006.  Revenue for the nine month period ended September 30, 2007 was $13.7 million, an increase of 15% over the year-to-date period in 2006.  Net loss was $982,000 ($0.22 loss per basic share) for the three month period ended September 30, 2007 compared to net income of $7.0 million ($1.57 earnings per basic share) in the same period in 2006.  For the year-to-date period ended September 30, 2007, net loss was $2.0 million ($0.45 loss per basis share) compared to net income of $5.8 million ($1.29 earnings per basic share) in the respective period in 2006.

             The financial results between periods are not directly comparable due to two previously disclosed transactions which resulted in significant non-recurring income in the quarter and year-to-date periods ended September 30, 2006.  On July 31, 2006, the Company sold the business of its QS Technologies subsidiary which resulted in a net gain on the sale of $4.9 million.  A second transaction, the sale of the Company’s interest in privately held Horizon Software International, Inc. in August 2006 resulted in an investment gain of $2.6 million.  Additionally, as a result of the sale of the QS Technologies business and in conformity with applicable accounting standards, the Company classified the QS business as Discontinued Operations for all periods reported in 2007 and 2006.  The financial results reported for the Company’s Continuing Operations for the three and nine-month periods ended September 30, 2007 and 2006 include the consolidated results of its remaining three subsidiaries: VISaer, Inc., CoreCard Software, Inc. and ChemFree Corporation.

             The substantial increase in revenue growth reported for both the quarter and year-to-date periods in 2007 reflects the successful roll-out of a national program by a new customer at the Company’s ChemFree subsidiary.  ChemFree achieved record sales volume of its SmartWasher® parts washer product in the third quarter of 2007. 

             J. Leland Strange, president and chief executive officer of Intelligent Systems, said, “The strong performance by our ChemFree operations in the second and third quarter of 2007 was very gratifying, although the sharp increase in revenue is unlikely to represent a sustained trend line.  While we continue to invest in and make progress developing and strengthening our product offerings at our CoreCard Software and VISaer subsidiaries, we have not achieved meaningful growth in revenue from new software license sales in 2007.”

        The Company expects to file its Form 10-QSB for the quarter ended September 30, 2007 with the Securities and Exchange Commission 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 may 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 9/30,

Nine Months Ended 9/30,

 

2007

2006

2007

2006

R  Revenue

 

 

 

 

    Products

$ 4,667

 $ 2,464

$10,325

$ 6,656

    Services

1,127

996

3,375

5,233

      Total revenue

5,794

3,460

13,700

11,889

      Total cost of revenue

3,317

1,605

7,236

5,798

    Expenses

 

 

 

 

    Marketing

1,057

545

2,083

1,577

    General & administrative

1,113

868

3,011

2,833

    Research & development

1,275

1,390

3,704

4,279

    Loss from operations

(968)

(948)

(2,333)

(2,598)

    Interest income (expense), net

33

(7)

130

(68)

    Investment income  (loss), net

--

2,638a

81

2,645a

    Equity in earnings of
       affiliate companies

6

188

48

351

    Other income (loss), net

(31)

(45)

(38)

(8)

      Income (loss) from continuing
            operations before tax

     (960)

1,826

(2,112)

322

    Income tax

22

-- 

22

--

    Income (loss) from continuing
       operations

(982)

1,826

(2,134)

322

    Income from discontinued   
        operations

--

317

--

600

    Gain on sale of discontinued
        operations

--

4,873b

97

4,873b

    Net income (loss)

$ (982)

$ 7,016

$ (2,037)

$ 5,795

    Income (loss) per share -             continuing  operations:

 

 

 

 

Basic

$(0.22)

$0.41

$(0.47)

$0.07

Diluted

$(0.22)

$0.40

$(0.47)

$0.07

I   Income per share -
             discontinued operations:

 

 

 

 

Basic

--

$1.16

$0.02

$1.22

Diluted

--

$1.12

$0.02

$1.18

    Income (loss) per share:

 

 

 

 

Basic

$(0.22)

$1.57

$(0.45)

$1.29

Diluted

$(0.22)

$1.52

$(0.45)

$1.25

    Basic weighted average
     shares outstanding

4,478,971

4,478,971

4,478,971

4,478,971

    Diluted weighted average
     shares outstanding

4,478,971

4,615,619

4,478,971

4,620,552

  1. Includes gain of $2.6 million on sale of Horizon Software investment.
  2. Gain of $4.9 million on sale of QS Technologies business.

 

CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

 

 

September 30,
2007

December 31,

2006

 

 

ASSETS

(unaudited)

 

 

 

Current assets:

 

 

 

  Cash

$  2,563

$  2,136

 

  Accounts receivable, net

2,742

2,006

 

  Notes and interest receivable, current portion

531

3,445

 

  Inventories

1,098

904

 

  Other current assets

780

1,072

 

    Total current assets

7,714

9,563

 

Long-term investments

1,222

1,174

 

Notes receivable, net of current portion

476

841

 

 

Property and equipment, at cost less depreciation

1,691

1,009

 

 

Goodwill, net

2,047

2,047

 

 

Other intangibles, net

325

359

 

 

Other assets, net

17

17

 

 

Total assets

$ 13,492

$ 15,010

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

  Note payable

$   156

$   --   

 

 

  Accounts payable

2,275

1,558

 

 

  Deferred revenue

2,618

3,094

 

 

  Accrued payroll

965

974

 

 

  Accrued expenses and other current liabilities

1,369

1,088

 

 

    Total current liabilities

7,383

6,714

 

 

Other long-term liabilities

213

356

 

 

Minority interest

1,516

1,516

 

Total stockholders’ equity

4,380

6,424

 

 

Total liabilities and stockholders’ equity

$ 13,492

$ 15,010

 

 

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