Note 2 - Restatement

12 Months Ended

Dec. 31, 2011

2. RESTATEMENT

OIn January 1, 2009, we adopted Financial Account Standards Board (“FASB”) authoritative guidance establishing accounting and reporting standards for Noncontrolling Interests in Consolidated Financial Statements. The standard requires the recognition of a noncontrolling interest in a subsidiary as a component of equity in the consolidated financial statements, separate from the parent’s equity for all periods presented. In addition, the standard requires the parent to attribute to the noncontrolling interest its share of net income and losses of the subsidiary and to disclose on the face of the consolidated income statement the amounts of net income and losses attributed to the noncontrolling interest. The standard also requires the parent to attribute to the noncontrolling interest its share of losses even if such attribution results in a deficit noncontrolling interest balance within the parent’s equity accounts. We recently determined that we have not been applying the guidance correctly in all respects because we have not been attributing to the noncontrolling interest (held by common shareholders of our CoreCord Software subsidiary) its share of the losses or income of the subsidiary and have not been disclosing such attributed amounts on the face of the consolidated statements of operations. Accordingly, we have restated the consolidated financial statements for the years ended December 31, 2011 and 2010. Below is a summary of the impact of the restatement:

For the year ended December 31, 2011, we previously reported net income of $657,000. In restatement, we attributed losses of $400,000 to the noncontrolling interest, resulting in net income attributable to Intelligent Systems Corporation of $1,057,000 ($0.11 per basic and diluted share), as restated.

As of December 31, 2011, we previously reported Intelligent Systems Corporation stockholders’ equity of $5,531,000 and noncontrolling interest equity of $1,516,000. In restatement, we reduced Intelligent Systems Corporation stockholders’ accumulated deficit by $1,619,000 (representing the accumulated losses attributed to the noncontrolling interest) and reduced the noncontrolling interest equity by the same amount. After restatement, at December 31, 2011, Intelligent Systems Corporation stockholders’ equity increased to $7,150,000 and the noncontrolling interest became a deficit of $103,000. Total stockholders’ equity was unchanged at $7,047,000.

For the year ended December 31, 2010, we previously reported net loss of $187,000. In restatement, we attributed losses of $465,000 to the noncontrolling interest, resulting in net income attributable to Intelligent Systems Corporation of $278,000 ($0.03 per basic and diluted share), as restated.

As of December 31, 2010, we previously reported Intelligent Systems Corporation stockholders’ equity of $4,945,000 and noncontrolling interest equity of $1,516,000. In restatement, we reduced Intelligent Systems Corporation stockholders’ accumulated deficit by $1,219,000 (representing the accumulated losses attributed to the noncontrolling interest) and reduced the noncontrolling interest equity by the same amount. After restatement, at December 31, 2010, Intelligent Systems Corporation stockholders’ equity increased to $6,164,000 and the noncontrolling interest decreased to $297,000. Total stockholders’ equity was unchanged at $6,461,000.

As of January 1, 2010, we previously reported Intelligent Systems Corporation stockholders’ equity of $5,093,000 and noncontrolling interest equity of $1,516,000. In restatement, we reduced Intelligent Systems Corporation stockholders’ accumulated deficit by $754,000 (representing the accumulated losses attributed to the noncontrolling interest) and reduced the noncontrolling interest equity by the same amount. After restatement, at January 1, 2010, Intelligent Systems Corporation stockholders’ equity increased to $5,847,000 and the noncontrolling interest decreased to $762,000.