EX-99 2 exhibit99.txt EXHIBIT 99.1 Exhibit 99.1 For Immediate Release Contact:Annmarie Gordon (860) 645-7878/email: agordon@scanoptics.com Susan Lucek (860) 645-7878/email: slucek@scanoptics.com Scan-Optics Announces First Quarter Results Manchester, CT - May 14, 2004 - Scan-Optics, Inc. (OTC BB: SOCR), a technological leader in information capture and customer service solutions for government, insurance, order fulfillment, proxy, health claims, test scoring and other paper-intensive businesses, today announced financial results for the first quarter of 2004. For the first quarter ended March 31, 2004, total revenues were $7.3 million, compared to $8.1 million in the 2003 first quarter. The Company reported a net loss for the quarter of $712,000, or $.10 per diluted share, compared to net income of $196,000, or $.03 per diluted share, for the same period in 2003. In discussing the results, James C. Mavel, Chairman, Chief Executive Officer and President, stated, "Although the results are not as robust as we would like certain other activities far surpassed our expectations. Scan-Optics is investing in the redesign of its core scanner platform and released the first of its new family of image scanners at the Association of Information and Image Management (AIIM) Conference in New York City March 6, 2004. The reception to this product was exceptional from the attendees as well as the conference officials who awarded our system a "Best in Show Award". We have completed the Beta test installations in Travelers Insurance and Frito-Lay in the USA and Netcom in South Korea. The feedback has been excellent and we look forward to wide market acceptance of this dramatically reengineered and lower cost product. Scan-Optics also received an order to develop a distributed capture assessment system from a very large "high stakes" test publisher that has the potential to change the way tests are administered and scored in support of the No Child Left Behind Law going forward. This is a new initiative for Scan-Optics that carries significant potential. Our Business Process Outsourcing activity continues to expand as we are busily digitizing the State of Connecticut Personal Income Tax forms for data entry with Virtual Solutions. This is additive to the BPO activity with the Federal Mediation Board and Samsung which have been discussed in earlier press releases. " -- more -- First Quarter Results Page two Scan-Optics, Inc., with headquarters in Manchester, Connecticut, is recognized internationally as an innovator and solution provider in the information management and imaging business. It designs, manufactures and services products and systems for character recognition, image processing and display, data capture, data entry, and multi-user business computers. Scan-Optics systems and software are marketed worldwide to commercial and government customers directly and through distributors. Through its Manufacturing Services Division, Scan-Optics also provides contract manufacturing services to customers, outsourcing the manufacturing of complex, electro-mechanical assemblies. The Company has sales and service offices located throughout the United States and abroad. Additional information is available at www.scanoptics.com. Statements about the Company's future expectations, including future revenues and earnings, and all other statements in this press release other than historical facts are "forward-looking statements" made under safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties that could materially affect future results. Among these risk factors are changes in general economic and business conditions in the United States and foreign markets, which impact capital investments by customers, the cyclical nature of funding within federal and state government agencies, further adverse changes in the Company's banking, lending and financing relationship, insufficient cash resources, increased competition from similar products, the implementation of other technologies which may provide alternative solutions, ability to complete projects in a timely manner, and other risk factors and cautionary statements listed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission, including but not limited to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003. First Quarter Results Page three SCAN-OPTICS, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31 (thousands, except share data) 2004 2003 ------------------------------------------------------------------------------- Revenues Hardware and software $ 3,427 $ 4,222 Professional services 1,510 1,384 Access services 2,396 2,504 ----------------------------- Total revenues 7,333 8,110 Costs of Revenue Hardware and software 2,605 2,628 Professional services 879 768 Access services 2,332 2,131 ----------------------------- Total costs of revenue 5,816 5,527 Gross Margin 1,517 2,583 Operating Expenses Sales and marketing 690 928 Research and development 551 339 General and administrative 833 928 Interest 167 199 ----------------------------- Total operating expenses 2,241 2,394 ----------------------------- Operating income (loss) (724) 189 Other income, net 32 17 ----------------------------- Income (loss) before income taxes (692) 206 Income tax expense 20 10 ----------------------------- Net Income (Loss) $ (712) $ 196 ============================= Basic earnings (loss) per share $ (.10) $ .03 ============================= Basic weighted-average shares 7,026,732 7,026,232 Diluted earnings (loss) per share $ (.10) $ .03 ============================= Diluted weighted-average shares 7,026,732 7,162,754 ####