|
|
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 SEPTEMBER 30, 1999
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 September 30, 1999, 5,104,467 shares of Common Stock were outstanding.
Item 1. Financial Statements
Intelligent Systems Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
| |
September 30,
1999 |
December 31,
1998 |
|
ASSETS |
(Unaudited) |
(Audited) |
|
Current assets: |
|
|
|
Cash |
$ 807 |
$ 461 |
|
Accounts receivable, net |
1,534 |
2,165 |
|
Notes and interest receivable |
276 |
189 |
|
Inventories |
447
|
741
|
|
Other current assets
|
524
|
990
|
|
Total current assets |
3,588
|
4,546
|
|
Long-term investments
|
9,259
|
8,593
|
|
Long-term notes receivable
|
59
|
75
|
|
Property and equipment, at cost less accumulated depreciation and amortization |
722 |
2,570 |
|
Excess of cost over underlying net assets of businesses acquired, |
|
|
|
net of accumulated amortization |
-- |
15 |
|
Other assets |
1,300 |
1,300 |
|
Total assets |
$14,928 |
$17,099 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Short-term borrowings |
$ 2,076 |
$ 2,078 |
|
Accounts payable |
539 |
1,727 |
|
Accrued expenses and other current liabilities |
1,729 |
2,568 |
|
Total current liabilities |
4,344 |
6,373 |
|
Long-term debt |
200 |
900 |
|
Minority interest |
193 |
185 |
|
Stockholders' equity: |
|
|
|
Common stock, $.01 par value, 20,000,000 authorized, 5,104,467 |
|
|
|
outstanding at September 30, 1999 and December 31, 1998 |
51 |
51 |
|
Paid-in capital |
24,046 |
24,046 |
|
Foreign currency translation adjustment |
-- |
(197) |
|
Unrealized gain in available-for-sale securities |
1,662 |
633 |
|
Accumulated deficit |
(15,568) |
(14,892) |
|
Total stockholders' equity |
10,191 |
9,641 |
|
Total liabilities and stockholders' equity |
$14,928 |
$17,099 |
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
September 30, |
Nine Months Ended September 30, |
| |
1999 |
1998 |
1999 |
1998 |
|
Net sales |
$1,816 |
$4,409 |
$6,589 |
$14,535 |
|
Expenses: |
|
|
|
|
|
Cost of sales |
714 |
3,253 |
3,182 |
10,187 |
|
Marketing |
172 |
867 |
798 |
2,731 |
|
General & administrative |
754 |
2,300 |
2,682 |
6,159 |
|
Research & development |
234 |
82 |
591 |
1,753 |
|
Loss from operations |
(58) |
(2,093) |
(664) |
(6,295) |
|
Other income (expense): |
|
|
|
|
|
Interest expense |
(3) |
(49) |
(71) |
(198) |
|
Investment income (expense), net |
(815) |
2,604 |
57 |
4,872 |
|
Other income (expense), net |
5 |
(330) |
8 |
(160) |
|
Income (loss) before income tax benefit and
minority interest |
(871) |
132 |
(670) |
(1,781) |
|
Income tax benefit |
-- |
(152) |
-- |
(152) |
|
Income (loss) before minority interest |
(871) |
284 |
(670) |
(1,629) |
|
Minority interest |
2 |
2 |
7 |
7 |
|
Net income (loss) |
$ (873) |
$ 282 |
$ (677) |
$ (1,636) |
|
Basic net income (loss) per share based upon basic
weighted average shares
|
$(0.17) |
$0.06 |
$(0.13) |
$(0.32) |
|
Diluted net income (loss) per share based upon diluted
weighted average shares
|
$(0.17) |
$0.05 |
$(0.13) |
$(0.32) |
|
Basic weighted average shares outstanding |
5,104,467 |
5,104,467 |
5,104,467 |
5,104,467 |
|
Diluted weighted average shares outstanding |
5,104,467 |
5,397,461 |
5,104,467 |
5,104,467 |
The accompanying notes are an integral part of these statements.
Intelligent Systems Corporation
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited, in thousands)
| |
Nine Months Ended September 30, |
|
CASH PROVIDED BY (USED FOR): |
1999 |
1998 |
|
|
|
|
|
OPERATIONS: |
|
|
|
Net loss |
$ (677) |
$ (1,636) |
|
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities, net of
effects of acquisitions and dispositions: |
|
|
|
Depreciation and amortization |
164 |
1,941 |
|
Gain from sale of assets |
(1,175) |
(5,109) |
|
Equity in net loss of affiliates |
859 |
236 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
(51) |
1,499 |
|
Inventories |
157 |
(73) |
|
Other current assets |
539 |
(368) |
|
Accounts payable |
(365) |
399 |
|
Accrued expenses and other current liabilities |
418 |
(1,283) |
|
Cash provided by (used for) continuing operations |
(131) |
(4,394) |
| |
|
|
|
INVESTING ACTIVITIES: |
|
|
|
Proceeds from sales of investments |
1,320 |
5,367 |
|
Purchase of investment securities |
(510) |
-- |
|
Acquisitions of companies, net of cash acquired |
-- |
83 |
|
Acquisitions of long-term investments |
(418) |
(300) |
|
Increase in minority interest |
7 |
7 |
|
Repayments of (advances under) notes receivable, net |
(88) |
262 |
|
Dispositions of property and equipment |
135 |
355 |
|
Cash provided by (used for) investing activities |
446 |
5,774 |
| |
|
|
|
FINANCING ACTIVITIES: |
|
|
|
Net repayments under short-term
borrowing arrangements |
(63) |
(679) |
|
Foreign currency translation adjustment |
94 |
(20) |
|
Cash provided by (used for) financing activities |
31 |
(699) |
|
Net increase in cash |
346 |
681 |
|
Cash at beginning of period |
461 |
43 |
|
Cash at end of period |
$ 807 |
$ 724 |
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 September 30, 1999 and 1998. The interim results for the nine months ended September 30, 1999 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, 1998, as filed in our annual report on Form 10-K.
- Sale of InterQuad Services
– Effective February 1, 1999, we sold our ownership in the InterQuad Services (Services) subsidiary. Services provides technical and software training in England. We sold our interest in return for a 19 percent interest in a privately held U.K. company whose principal asset is a 49 percent ownership in InterQuad Group. InterQuad Group is a privately held U.K. based company that provides computer hardware, software, training and consulting services to businesses. Effective as of the date of the sale, we no longer consolidate the results of Services and record our minority investment in accordance with the accounting policies outlined in Note 1 to the Consolidated Financial Statements in our Report on Form 10-K. Our cost basis is zero.
- Sale of Information Advantage Stock
– In January 1999, we sold our remaining 95,449 shares of common stock of Information Advantage (formerly IQ Software). In the first quarter, our results include a gain of $814,000 on the sale. Cash proceeds of the sale were $902,000.
- Accounting Changes
– 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 (Loss)
(unaudited, in thousands)
|
Three Materially at risk of Year 2000 related disruption but are prepared to develop contingency plans when and if we identify them as being at risk.
|
Financial Condition
In the first nine months of 1999, we derived $902,000 cash from selling our remaining shares of common stock of Information Advantage and $416,000 cash from sales of part of our holdings in two privately held software companies. We also borrowed $947,000 under a domestic line of credit. We used approximately $131,000 to fund corporate overhead expenses, $1,010,000 to pay down short-term notes payable to third parties, $533,000 for new investments and/or follow-on funding for prior investments, and $510,000 for a non-hedge contract on marketable securities which was closed out in early October 1999.
|
|
