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

bherron@intelsys.com

INTELLIGENT SYSTEMS ANNOUNCES FOURTH QUARTER AND FY 2007 RESULTS

Norcross, GA – March 31, 2008 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today the financial results for its fourth quarter and year ended December 31, 2007. 

Total revenue grew to $19.0 million in 2007, an increase of 31 percent compared to revenue of $14.5 million in 2006.  Net loss in 2007 was $2.4 million ($0.54 per basic and diluted share) compared to net income of $4.5 million ($1.00 per basic share and $0.98 per diluted share) in 2006. 

For the fourth quarter ended December 31, 2007, total revenue more than doubled to $5.3 million compared to revenue of $2.6 million in the fourth quarter of 2006.  The net loss in the fourth quarter of 2007 was $387,000 ($0.09 per basic and diluted share) compared to a net loss of $1.3 million ($.30 per basic and diluted share) in the fourth quarter of 2006.

The financial results reported for the 12 month periods ended December 31, 2007 and 2006 are not directly comparable due to two previously disclosed transactions which resulted in significant non-recurring income in 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.  As a result, the financial results reported for the Company’s continuing operations for the three and twelve month periods ended December 31, 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 fourth quarter and annual periods in 2007 as compared to the same periods in 2006 reflects record sales volume of ChemFree’s SmartWasher® parts washer system in both domestic and international markets.  As a result of this growth, ChemFree contributed almost 70 percent of the Company’s consolidated revenue in 2007.  In addition, in the three and twelve month periods ended December 31, 2007, the Company’s results were impacted positively by additional gain recorded on the sale of the QS Technologies business, including $1.2 million related to post-closing contingency amounts earned by the Company in 2007.   

J. Leland Strange, President and Chief Executive Officer of Intelligent Systems, said, “The growth in revenue and earnings by ChemFree in 2007 is encouraging and indicative of a strong product offering in an expanding market, although it is too early to tell if the business will achieve the same record growth in 2008.  Our CoreCard and VISaer subsidiaries have made more progress than is evident in the reported results because under GAAP accounting we do not recognize software revenue until long-term contracts are fully complete.  Recently, we have seen increased activity from potential customers interested in CoreCard’s software application for processing prepaid cards such as gift cards and payroll cards.”

The Company expects to file its Form 10-KSB for 2007 with the Securities and Exchange Commission today.  For additional information about the Company’s reported results, investors will be able to access the Form 10-KSB 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 and  the price of certain plastics components, other geopolitical or military actions, and general economic conditions, particularly those that cause businesses to delay or cancel purchase decisions.

 CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 

Three Months
Ended 12/31,

Twelve Months
 Ended 12/31,

 

2007

2006

2007

2006

Revenue

 

 

 

 

   Products

$ 4,230

 $ 1,744

$14,555

$ 8,401

   Services

1,075

826

4,450

6,059

    Total revenue

5,305

2,570

19,005

14,460

    Total cost of revenue

3,168

1,369

10,403

7,167

Expenses

 

 

 

 

    Marketing

992

482

3,075

2,059

    General & administrative

1,347

686

4,358

3,519

    Research & development

1,328

1,416

5,032

5,696

Loss from operations

(1,530)

(1,383)

(3,863)

(3,981)

    Interest income, net

5

125

136

57

    Investment income (loss), net

--

(98)

82

2,547a

    Equity in income (loss) of
      affiliate companies, net

(60)

23

(13)

374

    Other income (expense), net

(10)

7

(49)

(1)

Loss from continuing operations
 b    before tax

 (1,595)

(1,326)

(3,707)

(1,004)

Income tax provision (benefit)

(5)

-- 

17

--

Loss from continuing operations

(1,590)

(1,326)

(3,724)

(1,004)

Income from discontinued
 operations

--

--

--

600

Gain on sale of discontinued
 operations

1,203c

--

1,300c

4,873b

Net income (loss)

$ (387)

$( 1,326)

$ (2,424)

$ 4,469

Loss per share - continuing  operations: 

 

 

 

Basic

$(0.36)

$(0.30)

$(0.83)

$(0.22)

Diluted

$(0.36)

$(0.30)

$(0.83)

$(0.22)

Income per share - discontinued operations: 

 

 

 

Basic

$0.27

$0.00

$0.29

$1.22

Diluted

$0.27

$0.00

$0.29

$1.20

Income (loss) per share:

 

 

 

 

Basic

$(0.09)

$(0.30)

$(0.54)

$1.00

Diluted

$(0.09)

$(0.30)

$(0.54)

$0.98

Basic weighted average common shares outstanding

4,478,971

4,478,971

4,478,971

4,478,971

Diluted weighted average common shares outstanding

4,478,971

4,478,971

4,478,971

4,571,261

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

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

December 31, 2007

December 31,

2006

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

  Cash

$  554

$  2,136

 

  Accounts receivable, net

2,139

2,006

 

  Notes and interest receivable, current portion

540

3,445

 

  Inventories

1,424

904

 

  Other current assets

2,217

1,072

 

    Total current assets

6,874

9,563

 

Long-term investments

1,127

1,174

 

Notes and interest receivable, net of current portion

350

841

 

 

Property and equipment, net

1,894

1,009

 

 

Goodwill, net

2,047

2,047

 

 

Other intangibles, net

313

359

 

 

Other assets, net

17

17

 

 

Total assets

$ 12,622

$ 15,010

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

  Short-term borrowings

$   593

$   --   

 

 

  Accounts payable

1,482

1,558

 

 

  Deferred revenue

2,527

3,094

 

 

  Accrued payroll

1,162

974

 

 

  Accrued expenses and other
     current liabilities

1,235

1,088

 

 

    Total current liabilities

6,999

6,714

 

 

Long-term liabilities

95

356

 

 

Minority interest

1,516

1,516

 

Total stockholders’ equity

4,012

6,424

 

 

Total liabilities and stockholders’ equity

$ 12,622

$ 15,010

 

               

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