©2000-2010 Intelligent Systems
Letter to Shareholders
For twenty-seven years, we have created,
nurtured and grown technology-related companies. Almost fifteen years ago, our 1986 Annual Report used the
acorn and oak tree analogy to visualize the
business strategy that has continued to guide us
for many years. A review of our year 2000
activities will show how we continue to plant
the seeds of new business opportunities, to
nurture and guide them through early growth, and
ultimately to reap the harvest of our efforts.
Despite the volatility of the financial markets in 2000 and the significant decline in valuation of many technology businesses, several transactions yielded rewards from seeds planted in prior years:
sold most of our interest in affiliate company,
Risk Laboratories, for $8.8 million cash and a
gain of $8.6 million.
Prior to the sale, we had been the
largest shareholder in Risk, with over 30
percent ownership since 1997.
of our early companies, VerticalOne and
2Order.com, were acquired by public companies
and we realized aggregate gains of $1.0 million
on sales of their public securities during 2000.
We no longer own an interest in either
an Atlanta-based emerging pharmaceutical
company, completed its initial public offering.
We were part of the original investor
group of Georgia-based institutions that
supported Atherogenics, a company founded to
commercialize certain inventions by researchers
at Emory University.
We continue to own 246,506 shares of
common stock of Atherogenics that we believe
will grow in value as the company demonstrates
the strength of its novel drugs for treatment of
We shared part of the yield on these early investments with shareholders through a $0.52 per share special cash dividend in April 2000. We also planted the seeds for future harvests by partnering with emerging companies that we believe can grow into promising, viable businesses. As we have in the past, we look for companies with a strong technology base that are addressing a defined business need and that can support a realistic revenue and profit model. Among our new partner companies are the following:
is in Beta-test with its web-based artificial
intelligence tool that enables radiologists to
improve the accuracy of mammography exams.
Except for the founding team, which
includes the Chair for Engineering
Entrepreneurship at Georgia Tech, we are the
largest shareholder in MediZeus and are actively
helping the company execute its strategic and
Solutions and Ardext Technologies, both early
stage companies commercializing proprietary
technologies developed at Georgia Tech, are part
of the State of Georgia’s Yamacraw initiative
in the wireless communications industry.
are a small investor in NuTec Sciences, the
first company in EmTech, the biotech incubator
sponsored by Emory University and Georgia Tech.
NuTec, with the world’s most powerful
supercomputer in commercial use, uses
proprietary software to analyze complex data for
the energy industries and the emerging
Our role in nurturing and shaping early stage companies is tailored to the maturity and needs of each company. We leverage our experience and contacts as we help develop strategic and operational plans and round out the management team. In some cases we provide on-site advisory and infrastructure support at our technology incubator facility.
During 2000, both QS Technologies and ChemFree, our established consolidated subsidiaries, operated on a cash positive basis with moderate revenue growth. In the fourth quarter of 2000, our PsyCare America subsidiary sold its principal operating assets (mainly contracts and intellectual property) rather than risk future losses in a very negative environment for delivering hospital-based mental health treatment programs. One of our significant affiliate companies, VISaer, Inc., sold off its former Visibility product line to concentrate on more promising opportunities in maintenance, repair and overhaul (MRO) software and services for the aerospace industry. We expect to continue to play an important role in building the VISaer business.
As I write this letter in March 2001, we have announced an important transaction involving the pending sale of our interest in PaySys International, an affiliate company, to First Data Corporation. We expect that the sale, slated to close no later than April 30, 2001 subject to satisfaction of various closing conditions, will yield cash proceeds to us of between $17.0 million and $19.0 million. At the same time, PaySys will pay us $3.5 million plus interest related to short-term bridge loans. We may receive additional cash proceeds based on amounts held in escrow for post-closing claims that may arise. As part of the sale, we will also acquire a 32 percent interest in two development stage companies, Delos Payment Systems, Inc. and dbbAPPS, Inc., both spin-offs from PaySys, that will develop and market application software based on the proprietary software architecture that has been developed by PaySys over the past several years.
In 2000, we planted and nurtured a number of new opportunities. We continued to prune and cultivate our more established companies. And we realized the fruits of seeds planted in earlier years. We recognize that some of the seeds we plant may fall on rocky ground or succumb to harsh conditions. We intend to be cautious as we evaluate new opportunities in the current business environment and believe our results represent solid validation of our long-term strategy. With increased capital and generally lower valuations for technology businesses, we will have new opportunities to partner with emerging technology companies and to leverage our experience and resources to help them grow.
J. Leland Strange
of the Board and President