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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 2008 RESULTS 

Norcross, GA – August 14, 2008 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today the financial results for its second quarter and six month period ended June 30, 2008. 

             The Company recorded net income of $1,543,000 ($0.34 per basic and diluted share) in the three month period ended June 30, 2008 compared to a loss of $922,000 ($0.21 per basic and diluted share) in the second quarter of 2007.  In the six month period ended June 30, 2008, net income was $58,000 ($0.01 per basic and diluted share) compared to a net loss of $1,055,000 ($0.24 per basic and diluted share) in the six month period in 2007.  The reported results for the three and six month periods of 2008 were bolstered by a gain of $2,884,000 on the previously announced sale of the Company’s VISaer business which was effective on April 16, 2008.  The gain on the sale offset losses from continuing operations in both the three and six month periods of 2008. 

            As a result of the VISaer sale, the VISaer business has been classified as discontinued operations for all periods reported.  Accordingly the results of continuing operations reported for the three and six month periods in 2008 and 2007 include only the financial results associated with the Company’s ongoing operations.  Following the sale of VISaer, the Company has two core operating businesses: ChemFree Corporation and CoreCard Software, Inc.   

            Total revenue from continuing operations in the three month period ended June 30, 2008 was $3,719,000, an increase of 23 percent compared to the second quarter of 2007.  Revenue for the six months ended June 30, 2008 also reflected strong period-to-period growth, increasing 24 percent to $7,795,000 compared to $6,308,000 in the six month period in 2007.

            The increase in revenue reported for the second quarter and year-to-date periods of 2008 is attributed to strong sales in both domestic and international markets of the ChemFree subsidiary’s SmartWasher® parts washer system.  Offsetting part of the ChemFree revenue increase was a decline in software revenue recognized at the CoreCard subsidiary.  Revenue related to software licenses tends to vary significantly from quarter to quarter based on the timing of delivery and customer acceptance of licensed software because the Company presently defers revenue associated with in-process contracts until each contract is complete.  At June 30, 2008, the Company has approximately $1.8 million in deferred revenue associated with in-process software contracts which is expected to be recognizable upon completion of the various contracts within the next several quarters.

             According to J. Leland Strange, Chief Executive Officer of ISC, “ChemFree continues to build a solid business addressing both domestic and international markets, although repeating the record growth of the first half of 2008 for the balance of the year is unlikely.  We continue to devote significant resources to support CoreCard Software’s progress in rolling out its transaction processing software for applications such as prepaid cards and revolving credit cards. We expect CoreCard’s contribution to revenue will increase as more customer contracts are completed.”  

             The Company expects to file its Form 10-Q for the period ended June 30, 2008 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-Q on the Company’s website at www.intelsys.com or at the SEC site, www.sec.gov

 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 are CoreCard Software, Inc. (www.corecard.com), (a software company) 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 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
(unaudited; in thousands, except share and per share amounts)

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2008

2007

2008

2007

 

Revenue

 

 

 

 

 

   Products

$ 3,412

$ 2,573

$ 7,392

$ 5,659

 

   Services

307

460

403

649

 

    Total revenue

3,719

3,033

7,795

6,308

 

Cost of revenue

 

 

 

 

 

   Products

1,894

1,496

4,009

2,566

 

   Services

221

359

421

480

 

    Total cost of revenue

2,115

1,855

4,430

3,046

 

Expenses

 

 

 

 

 

    Marketing

769

509

1,538

863

 

    General & administrative

1,205

793

2,522

1,672

 

    Research & development

904

731

1,713

1,612

 

Loss from operations

(1,274)

(855)

(2,408)

(885)

 

Other income (expense)

 

 

 

 

 

    Interest income (expense), net

(4)

45

(9)

111

 

    Investment income

-- 

92

-- 

81

 

    Equity in income of affiliate companies

27

41

53

42

 

    Other expense

-- 

(4)

--  

(6)

 

Loss from continuing operations before income taxes

(1,251)

(681)

(2,364)

(657)

 

Income taxes

5

-- 

17

-- 

 

Loss from continuing operations

(1,256)

(681)

(2,381)

(657)

 

Loss from discontinued operations

(85)

(241)

(446)

(495)

 

Gain on sale of discontinued operations

2,884

-- 

2,884

97

 

Net income (loss)

$  1,543

$  (922)

$      58

$  (1,055)

 

Net income (loss) per share:

 

 

 

 

 

  Basic

$ 0.34

$ (0.21)

$ 0.01

$ (0.24)

 

  Diluted

$ 0.34

$ (0.21)

$ 0.01

$ (0.24)

 

Basic weighted average shares outstanding

4,478,971

4,478,971

4,478,971

4,478,971

 

Diluted weighted average shares outstanding

4,546,365

4,478,971

4,545,727

4,478,971

 

               

 


 

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

June 30,
2008

December 31,

2007

 

 

ASSETS

(unaudited)

 

 

 

Current assets:

 

 

 

  Cash

$   1,162

$     554

 

  Accounts receivable, net

2,117

2,139

 

  Notes and interest receivable, current portion

516

540

 

  Inventories

1,310

1,424

 

  Other current assets

630

2,217

 

    Total current assets

5,735

6,874

 

Long-term investments

1,225

1,127

 

Notes and interest receivable, net of current portion

1,366

350

 

 

Property and equipment, at cost less accumulated depreciation

1,794

1,894

 

 

Goodwill, net

369

2,047

 

 

Other intangibles, net

291

313

 

 

Other assets, net

-- 

17

 

 

Total assets

$ 10,780

$ 12,622

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

  Line of credit

$    --

$      593

 

 

  Note payable, current portion

93

-- 

 

 

  Accounts payable

917

1,482

 

 

  Deferred revenue

1,989

2,527

 

 

  Accrued payroll

653

1,162

 

 

  Accrued expenses and other current liabilities

1,300

1,235

 

 

    Total current liabilities

4,952

6,999

 

 

Long-term liabilities

301

95

 

 

Minority interest

1,516

1,516

 

Stockholders’ equity

4,011

4,012

 

 

Total liabilities and stockholders’ equity

$ 10,780

$ 12,622

 

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