-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U2T9l2Rtk3q7PdUE6Su9/l7aYMdIPhqIvhrOIhawKOic/dyWLX8p8aMQpJ7OdkwT A7gLHDqgarZ7aac9UPUPpg== 0000950144-00-006376.txt : 20000515 0000950144-00-006376.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950144-00-006376 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLIGENT SYSTEMS CORP CENTRAL INDEX KEY: 0000320340 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 581964787 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09330 FILM NUMBER: 627250 BUSINESS ADDRESS: STREET 1: 4355 SHACKLEFORD RD CITY: NORCROSS STATE: GA ZIP: 30093 BUSINESS PHONE: 4043812900 MAIL ADDRESS: STREET 1: 4355 SHACKLEFORD ROAD CITY: NORCROSS STATE: GA ZIP: 30093 10-Q 1 INTELLIGENT SYSTEMS CORPORATION 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED MARCH 31, 2000 Commission file number 1-9330 INTELLIGENT SYSTEMS CORPORATION - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) GEORGIA 58-1964787 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4355 SHACKLEFORD ROAD, NORCROSS, GEORGIA 30093 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 381-2900 Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of March 31, 2000, 5,684,467 shares of Common Stock were outstanding. ================================================================================ 2 ITEM 1. FINANCIAL STATEMENTS INTELLIGENT SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands except share amounts)
MARCH 31, DECEMBER 31, 2000 1999 - ------------------------------------------------------------------------------------------------------------------- ASSETS (Unaudited) (Audited) - ------------------------------------------------------------------------------------------------------------------- Current assets: Cash $ 8,007 $ 737 Accounts receivable, net 1,675 1,464 Notes and interest receivable 90 254 Inventories 426 325 Other current assets 303 263 - ------------------------------------------------------------------------------------------------------------------- Total current assets 10,501 3,043 - ------------------------------------------------------------------------------------------------------------------- Long-term investments 14,849 8,576 Long-term notes receivable 47 53 Property and equipment, at cost less accumulated depreciation and amortization 653 686 Other assets 1,300 1,300 - ------------------------------------------------------------------------------------------------------------------- Total assets $ 27,350 $ 13,658 =================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------------------- Current liabilities: Short-term borrowings $ 1,100 $ 1,000 Accounts payable 664 444 Accrued expenses and other current liabilities 4,661 1,647 - ------------------------------------------------------------------------------------------------------------------- Total current liabilities 6,425 3,091 - ------------------------------------------------------------------------------------------------------------------- Long-term debt 163 363 - ------------------------------------------------------------------------------------------------------------------- Minority interest (2) (5) - ------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Common stock, $.01 par value, 20,000,000 authorized, 5,684,467 and 5,114,467 outstanding at March 31, 2000 and December 31, 1999, respectively 57 51 Paid-in capital 24,062 24,069 Unrealized gain in available-for-sale securities 5,859 731 Cash dividend declared (2,956) -- Accumulated deficit (6,258) (14,642) - ------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 20,764 10,209 - ------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 27,350 $ 13,658 ===================================================================================================================
The accompanying notes are an integral part of these balance sheets. Page 2 3 INTELLIGENT SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands except share amounts)
THREE MONTHS ENDED MARCH 31, 2000 1999 - -------------------------------------------------------------------------------------------------------------- Net sales $ 2,007 $ 2,683 Expenses: Cost of sales 841 1,386 Marketing 220 376 General & administrative 1,047 1,030 Research & development 208 175 - -------------------------------------------------------------------------------------------------------------- Loss from operations (309) (284) - -------------------------------------------------------------------------------------------------------------- Other income (expense): Interest income (expense) 32 (38) Investment income, net 8,653 1,417 Other income, net 11 1 - -------------------------------------------------------------------------------------------------------------- Income before minority interest 8,387 1,096 - -------------------------------------------------------------------------------------------------------------- Minority interest 3 2 - -------------------------------------------------------------------------------------------------------------- Net income $ 8,384 $ 1,094 ============================================================================================================== Basic net income per share based upon basic weighted average shares $ 1.48 $ 0.21 - -------------------------------------------------------------------------------------------------------------- Diluted net income per share based upon diluted weighted average shares $ 1.46 $ 0.21 ============================================================================================================== Basic weighted average shares outstanding 5,653,822 5,104,467 - -------------------------------------------------------------------------------------------------------------- Diluted weighted average shares outstanding 5,735,720 5,271,041 ==============================================================================================================
The accompanying notes are an integral part of these statements. Page 3 4 INTELLIGENT SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited, in thousands)
THREE MONTHS ENDED MARCH 31, CASH PROVIDED BY (USED FOR): 2000 1999 - ------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net income $ 8,384 $ 1,094 Adjustments to reconcile net income to net cash used for operating activities, net of effects of acquisitions and dispositions: Depreciation and amortization 21 78 Gain from sales of assets (8,849) (1,047) Equity in net loss (income) of affiliates 195 (371) Changes in operating assets and liabilities: Accounts receivable (211) (42) Inventories (101) (7) Other current assets (40) 142 Accounts payable 220 (378) Accrued expenses and other current liabilities 58 38 - ------------------------------------------------------------------------------------------------------------------- Cash used for continuing operations (323) (493) =================================================================================================================== INVESTING ACTIVITIES: Proceeds from sales of investments 8,938 1,187 Acquisitions of long-term investments (1,400) (200) Increase in minority interest 3 2 Repayment (advances) under notes receivable, net 141 (15) Dispositions of property and equipment, net 11 117 - ------------------------------------------------------------------------------------------------------------------- Cash provided by investing activities 7,693 1,091 =================================================================================================================== FINANCING ACTIVITIES: Net repayments under short-term borrowing arrangements (100) (210) Foreign currency translation adjustment -- 94 - ------------------------------------------------------------------------------------------------------------------- Cash provided by (used for) financing activities (100) (116) - ------------------------------------------------------------------------------------------------------------------- Net increase in cash 7,270 482 Cash at beginning of period 737 461 - ------------------------------------------------------------------------------------------------------------------- Cash at end of period $ 8,007 $ 943 =================================================================================================================== ===================================================================================================================
The accompanying notes are an integral part of these statements. Page 4 5 INTELLIGENT SYSTEMS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Throughout this report, the terms "we", "us", "ours", "ISC" and "company" refer to Intelligent Systems Corporation, including its subsidiaries. 2. The unaudited consolidated financial statements presented in this Form 10-Q have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of ISC management, these consolidated financial statements contain all adjustments (which comprise only normal and recurring accruals) necessary to present fairly the financial position as of March 31, 2000 and 1999. The interim results for the three months ended March 31, 2000 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with our combined financial statements for the fiscal year ended December 31, 1999, as filed in our annual report on Form 10-K. 3. Comprehensive Income - In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income". The Statement requires companies to report comprehensive income and its components in their financial statements. Comprehensive income is the total of net income and all other non-owner changes in equity in a period. We adopted the disclosure requirements of this statement in March 1998. Consolidated Statements of Comprehensive Income (unaudited, in thousands)
Three Months Ended March 31, 2000 1999 - -------------------------------------------------------------------------------------------------------- Net Income $ 8,384 $1,094 Other comprehensive income (loss): Foreign currency translation adjustments -- 197 Unrealized gain (loss) in available-for-sale securities 5,127 (636) - -------------------------------------------------------------------------------------------------------- Comprehensive income $13,511 $ 655 ========================================================================================================
4. Sale of Interest in Risk Laboratories, LLC ("Risk") - In the quarter ended March 31, 2000, we sold 2,310,000 equity units in Risk for $8,801,000 in cash to American Home Assurance Company, recognizing a gain of $8,622,000 on the transaction. We retain ownership of 623,515 equity units representing approximately 7 percent of the equity of Risk, after a capital infusion of $5,000,000 in Risk by American Home Assurance Company. 5. Sale of Partial Holdings in S1 Corporation - In the first quarter ended March 31, 2000, we sold 2,000 shares of common stock of S1 Corporation [NASDAQ: SONE] for $217,000 cash, recognizing a gain of $207,000. We retain ownership of 8,000 shares of S1 Corporation stock. The stock in S1 Corporation was received as consideration for our shares of stock in VerticalOne Corporation upon the merger of VerticalOne and S1 Corporation in the fourth quarter of 1999. Page 5 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Summary - Our consolidated operating subsidiaries in 2000 are ChemFree Corporation, QS Technologies and PsyCare America. In the first quarter of 1999, we also consolidated the results of our InterQuad subsidiary prior to its sale in February 1999. Part of the difference in consolidated operating results between the first quarter last year and this year is a result of not including the InterQuad operation and its financial losses from the date of its sale in February 1999. Overall, results for ongoing consolidated companies improved year-to-year, with each subsidiary operating profitably. During the current quarter we recognized a significant return on the sale of part of our investment in Risk Laboratories which resulted in net income for the quarter of $8.4 million compared to $1.1 million for the first quarter of 1999. Refer to Note 4 on page 5. Sales - We generate revenue from operations in two industry segments: technology-related products and services, and health care services. For the three month period ended March 31, 2000, net sales were $2,007,000, a decline of 25 percent compared to the first quarter in 1999. The major factor contributing to lower revenue is the sale of the InterQuad subsidiary, which had contributed revenue of $581,000 in the first quarter of 1999. In addition, revenue declined slightly in the first quarter this year compared to last year at the PsyCare subsidiary due to a reduction in the number of programs and revenue per program. However, revenue declines at the PsyCare unit have stabilized and revenue increased slightly this quarter compared to the third and fourth quarters of 1999. Cost of sales - Cost of sales as a percentage of revenue decreased significantly in the first quarter this year compared to the same period last year. The improvement reflects mainly the following: - - improved cost control at the PsyCare subsidiary - - reduction in the cost of sales for fluid products sold by ChemFree and a change in product mix at ChemFree favoring higher margin fluid sales - - sale of the InterQuad subsidiary which had a relatively high cost of sales compared to the ongoing subsidiaries. Operating Expenses - Marketing expenses declined in both absolute dollars and as a percentage of revenue in the first quarter of 2000 compared to the first quarter last year, principally due to the sale of InterQuad. General and administrative expenses were slightly higher in the first quarter of 2000 than in the same period last year. Non-recurring bonus expense of $150,000 related to the successful completion of the Risk transaction offset the reduction in general and administrative expenses that were associated with the InterQuad operation last year. Research and development expense increased slightly period to period at both the QS Technologies and ChemFree subsidiaries to support more new product development. Interest Income - We had net interest income of $32,000 in the first quarter this year compared to net interest expense of $38,000 in the first quarter of 1999. This year, we had a lower level of notes payable outstanding and we earned interest on higher cash levels in the first quarter this year compared to last year. Investment Income - In the first quarter this year, we sold 2,310,000 equity units in Risk Laboratories LLC in a private transaction that generated a gain of $8,622,000. We retain 623,515 equity units in Risk, representing approximately 7% of Risk. In addition, in the first quarter this year we realized a Page 6 7 gain of $207,000 on the sale of twenty percent of our holdings in S1 Corporation, which was offset in part by $195,000 in net losses in equity of investments. By comparison, in the first quarter last year, we realized a gain of $814,000 on the sale of our remaining shares of Information Advantage common stock, a gain of $233,000 on the sale of part of our investment in a privately held software company, and $370,000 income in the equity of affiliates accounted for by the equity method. Minority Interest - This amount represents the pro rata ownership share of minority shareholders in certain non-wholly-owned subsidiaries of the company. Common Shares - In the first quarter of 2000, three officers of the company exercised options to acquire a total of 570,000 shares of common stock, thereby increasing the average number of basic shares outstanding during the quarter to 5,653,822 compared to 5,104,467 for the first quarter of 1999. FINANCIAL CONDITION In the first three months of 2000, our principal sources of cash were $8,701,000, net of sales expenses from the sale of 2,310,000 equity units of Risk Laboratories in a private transaction and $217,000 from the sale of 2000 shares of SI Corporation. Our main use of cash was a total of $1,250,000 for new investments in three early stage technology companies (MiracleWorker.com, ThinkWorks and RF Solutions) and $150,000 in follow-on investments in three earlier funded companies. Notes and interest receivable declined during the first quarter because Risk repaid a loan at the time of the sale transaction. Long-term investments increased during the first quarter reflecting new and follow-on investments totaling $1.4 million in early stage technology companies as well as increased value of our holdings in S1 Corporation [NASDAQ: SONE] and Primus Knowledge Systems [NASDAQ: PKSI] due to higher trading prices of these stocks on March 31, 2000 compared to December 31, 1999. We acquired 66,431 shares of PKSI stock in exchange for our ownership interest in 2order.com when 2order.com was acquired by Primus in January 2000. The unrealized gain of $5,859,000 in the shares of SONE and PKSI is also reflected as a separate category of shareholders' equity on the balance sheet. Accrued liabilities increased substantially at March 31, 2000 compared to December 31, 1999 to reflect a declared but unpaid dividend of $.52 per share ($2,956,000 in total). The dividend was declared on March 28, 2000 and paid after the quarter end on April 20, 2000. We believe we have adequate cash and access to capital to support the company's operations and plans for the foreseeable future. PART II. OTHER INFORMATION ITEM 6. EXHIBITS, REPORTS ON FORM 8-K A. The following exhibit is filed with this report: Exhibit 27 Financial Data Schedule (for SEC use only). B. The Company has not filed any Reports on Form 8-K during the period covered by this report. Page 7 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. INTELLIGENT SYSTEMS CORPORATION Registrant Date: May 12, 2000 By: /s/ J. LELAND STRANGE --------------------------------------------- J. Leland Strange Chairman of the Board, President Date: May 12, 2000 By: /s/ BONNIE L. HERRON --------------------------------------------- Bonnie L. Herron Vice President, Chief Financial Officer Page 8 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 8,007 0 1,675 0 426 10,501 653 0 27,350 6,425 0 0 0 57 20,707 27,350 2,007 2,007 841 0 1,475 0 32 8,387 0 8,384 0 0 0 8,384 1.48 1.46
-----END PRIVACY-ENHANCED MESSAGE-----