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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 incorporation or organization) (I.R.S. Employer Identification No.)
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.
Item 1. Financial Statements
Intelligent Systems Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
| |
March 31,
2000 |
December 31,
1999 |
|
ASSETS |
(Unaudited) |
(Audited) |
|
Current assets: |
|
|
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Cash |
$ 8,007 |
$ 737 |
|
Accounts receivable, net |
1,675 |
1,464 |
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Notes and interest receivable |
90 |
254 |
|
Inventories |
426 |
325 |
|
Other current assets |
303 |
263 |
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Total current assets |
10,501 |
3,043 |
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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 |
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Other assets |
1,300 |
1,300 |
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Total assets |
$27,350 |
$13,658 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
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Current liabilities: |
|
|
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Short-term borrowings |
$ 1,100 |
$ 1,000 |
|
Accounts payable |
664 |
444 |
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Accrued expenses and other current liabilities |
4,661 |
1,647 |
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Total current liabilities |
6,425 |
3,091 |
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Long-term debt |
163 |
363 |
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Minority interest |
(2) |
(5) |
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Stockholders’ equity: |
|
|
|
Common stock, $.01 par value, 20,000,000 authorized, 5,684,467 and |
|
|
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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 |
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Cash dividend declared |
(2,956) |
-- |
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Accumulated deficit |
(6,258) |
(14,642) |
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Total stockholders’ equity |
20,764 |
10,209 |
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Total liabilities and stockholders’ equity |
$27,350 |
$13,658 |
The accompanying notes are an integral part of these balance sheets.
Intelligent Systems Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share amounts)
|
Three Months Ended March 31, |
2000 |
1999 |
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Net sales |
$2,007 |
$2,683 |
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Expenses: |
|
|
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Cost of sales |
841 |
1,386 |
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Marketing |
220 |
376 |
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General & administrative |
1,047 |
1,030 |
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Research & development |
208 |
175 |
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Loss from operations |
(309) |
(284) |
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Other income (expense): |
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|
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Interest income (expense) |
32 |
(38) |
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Investment income, net |
8,653 |
1,417 |
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Other income, net |
11 |
1 |
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Income before minority interest |
8,387 |
1,096 |
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Minority interest |
3 |
2 |
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Net income |
$8,384 |
$1,094 |
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Basic net income per share based upon basic weighted average shares |
$1.48 |
$0.21 |
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Diluted net income per share based upon diluted weighted average shares
|
$1.46 |
$0.21 |
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Basic weighted average shares outstanding |
5,653,822 |
5,104,467 |
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Diluted weighted average shares outstanding |
5,735,720 |
5,271,041 |
The accompanying notes are an integral part of these statements.
Intelligent Systems Corporation
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited, in thousands)
| |
Three Months Ended March 31, |
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CASH PROVIDED BY (USED FOR): |
2000 |
1999 |
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|
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OPERATIONS: |
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|
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Net income |
$8,384 |
$1,094 |
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Adjustments to reconcile net income to net cash used for
operating activities, net of effects of acquisitions and dispositions:
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Depreciation and amortization |
21 |
78 |
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Gain from sales of assets |
(8,849) |
(1,047) |
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Equity in net loss (income) of affiliates |
195 |
(371) |
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Changes in operating assets and liabilities: |
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Accounts receivable |
(211) |
(42) |
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Inventories |
(101) |
(7) |
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Other current assets |
(40) |
142 |
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Accounts payable |
220 |
(378) |
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Accrued expenses and other current liabilities |
58 |
38 |
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Cash used for continuing operations |
(323) |
(493) |
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INVESTING ACTIVITIES: |
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Proceeds from sales of investments |
8,938 |
1,187 |
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Acquisitions of long-term investments |
(1,400) |
(200) |
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Increase in minority interest |
3 |
2 |
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Repayment (advances) under notes receivable, net |
141 |
(15) |
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Dispositions of property and equipment, net |
11 |
117 |
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Cash provided by investing activities |
7,693 |
1,091 |
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FINANCING ACTIVITIES: |
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Net repayments under short-term borrowing arrangements |
(100) |
(210) |
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Foreign currency translation adjustment |
-- |
94 |
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Cash provided by (used for) financing activities |
(100) |
(116) |
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Net increase in cash |
7,270 |
482 |
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Cash at beginning of period |
737 |
461 |
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Cash at end of period |
$8,007 |
$ 943 |
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The accompanying notes are an integral part of these statements.
Intelligent Systems Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Throughout this report, the terms "we", "us", "ours", "ISC" and "company" refer to Intelligent Systems Corporation, including its subsidiaries.
- 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.
- 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)
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Three Months Ended March 31, |
| |
2000 |
1999 |
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Net Income |
$ 8,384 |
$1,094 |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments |
-- |
197 |
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Unrealized gain (loss) in available-for-sale securities |
5,127 |
(636) |
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Comprehensive income |
$13,511 |
$ 655 |
- 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.
- 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.
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
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