Adaptive Solutions Substantially Reduces Loss for 1997, Posts Fourth Quarter Profit Before Charges.

BEAVERTON, Ore--(BUSINESS WIRE)--Feb. 5, 1998--Adaptive Solutions Inc. (NASDAQ:ADSO) today announced a significant reduction in its net loss in 1997 compared with 1996.

Excluding one-time charges related to the company's acquisition of the Eastman Kodak OCR business, the company also recorded a profit in the fourth quarter of the year, as previously forecast.

Total revenue for the fourth quarter of 1997 was $1,199,000, up 23% from revenue of $975,000 in the fourth quarter of 1996. The 1997 fourth quarter includes one-time charges to write off inventory and in-process research and development expense totaling $840,000. If these one-time charges are excluded from 1997 fourth quarter results, net income would have been $490,000 or $0.07 basic earnings per share. As stated the net loss for the latest quarter was $350,000 or $0.05 per share, compared with a net loss of $283,000 or $0.04 per share a year ago.

For the full year 1997, revenue was $3,270,000, compared with $7,275,000 in 1996. The net loss for 1997 was $1,154,000 or $0.16 per share, compared with $5,550,000 or $0.82 per share in the prior year.

"The fourth quarter was a pivotal time period for Adaptive Solutions," commented Dan Meub, president and chief executive officer of the company. "As a major step in our goal of becoming a leading Computer Assisted Data Entry company, we completed the acquisition of Kodak's OCR business, and the one-time charges in the fourth quarter are associated with that acquisition. The new product line provides us with service revenue, an installed base of customers, and a product foundation to build on in the coming year.

"As previously announced, the fourth quarter included revenue of $750,000 as a result of changes in a contract with Motorola," continued Meub, "and we will record an additional $750,000 of revenue in the first quarter of 1998. Combined with revenue from the former Kodak installed base and some revenue from our CNAPS business, this payment is expected to contribute to profitability in the first quarter of 1998. We are enthusiastic about the integration of the recently-acquired Kodak IMAGELINK OCR product with EntryLink, our new full-function data entry product line. Moreover, we are finalizing key channel partnerships and are actively pursuing a range of solid sales prospects. As a result, we are optimistic about ongoing service, upgrade, and new product revenue opportunities visible to us during the remainder of 1998."

This press release contains forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements, including, without limitation, development of additional sales of Kodak OCR products from new and existing customers, implementation of the company's plans to add to the acquired product line, successful completion of expected contracts and continued cost control. These risks and uncertainties are discussed in greater detail in the company's reports to the S.E.C.

Adaptive Solutions, headquartered in Beaverton, Ore., was founded in 1988 and pioneered data parallel processing for advanced pattern recognition, image processing, and intelligent character recognition applications. Today, Adaptive Solutions provides productive, mission critical, data entry through standards-based Computer Assisted Data Entry (CADE) solutions.

                          ADAPTIVE SOLUTIONS
                           INCOME STATEMENT
                     (000, except per share data)

                            Quarter Ended           Year Ended
                        12/31/97    12/31/96   12/31/97      12/31/96

Net Product Revenue       1,199         972       2,711         6,265
Research and Development
   Revenue                   --           3         559         1,010

TOTAL REVENUE             1,199         975       3,270        7,275

Cost of Product Revenue     264(1)      347         765(1)     5,382
Research & Development      243         343       1,266        2,705
Sales & Marketing           155         253         800        1,888
General & Administrative    223         301       1,000         2,953
In-Process Research
 and Development            216(2)       --         216(2)        --
Special Charges             456(3)       --         456(3)        --

TOTAL OPERATING
   EXPENSES               1,557       1,244       4,503       12,928

OPERATING LOSS             (358)       (269)     (1,233)      (5,653)

Other Income/(Expense)        8         (14)         79          103

LOSS BEFORE
   INCOME TAXES            (350)       (283)     (1,154)      (5,550)

Income Tax Expense           --          --          --           --

NET LOSS                 $ (350)     $ (283)  $  (1,154)    $ (5,550)

NET LOSS PER SHARE --
BASIC AND DILUTED       $ (0.05)  $   (0.04)   $ (0.16)    $   (0.82)

Weighted Average
Shares Outstanding        7,203       6,947       7,043        6,791

(1) Includes $168,000 of one-time inventory write-offs related to the
company's acquisition of the OCR product line

(2) Write-off of in-process research and development expenses related
to the company's acquisition of the OCR product line

(3) Write-off of excess inventory related to product lines
discontinued as part of the company's acquisition of the OCR
product line


                          ADAPTIVE SOLUTIONS
                            BALANCE SHEETS
                                 (000)

                                        12/31/97          12/31/96

Cash and Cash Equivalents               $   2,052          $   3,612
Short-term Investments                        337                 --
Trade Accounts Receivable -- Net              915              1,084
Inventory -- Net                              536              1,007
Prepaid Expenses                               72                 33
TOTAL CURRENT ASSETS                        3,912              5,736

Property and Equipment -- Net                 778              1,337
Other Assets                                  148                139

TOTAL ASSETS                            $   4,838           $  7,212


Accounts Payable                       $      286          $     115
Accrued Expenses                              452              1,626
Capital Leases -- Current Portion             254                447
Deferred Revenue                              183                720
Notes Payable                                 376                 --
TOTAL CURRENT LIABILITIES                   1,551              2,908

Capital Leases, less
   Current Portion                             38                259

TOTAL STOCKHOLDERS' EQUITY                  3,249              4,045

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                  $  4,838           $  7,212

CONTACT: Adaptive Solutions, Inc.

Daniel J. Meub, 503/690-1236

or

Harris Massey Herinckx

Fletcher Chamberlin, 503/973-9226