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©2000 Intelligent Systems |
Analysis
of our company financials is complicated because
we emphasize increasing the value of our various
businesses for future spin-off through
investment for growth rather than quarterly
earnings. Profit
/loss measurement on a quarterly basis is not
appropriate for our business model since we
invest in growing businesses (often
consolidating their losses) which often are sold
later or taken public. Furthermore, since the
individual businesses are often small and
growing, we take a conservative position and do
not project forward results on a business by
business basis. Some of the companies will fail
to achieve their objective while others will
exceed their goals. We
consolidate results of operations of partner
companies in which we own at least 50 percent of
the equity. We account for businesses in which
we own 20 to 50 percent by the equity method.
Our ownership may change from time to time; for
instance when a partner company goes public or
when the company raises additional financing. Our company’s reported tangible net value is generally below its anticipated market value, due in part to the equity method of accounting. The actual value may significantly exceed this if one were to take into account the potential market value of some of the companies we are growing. In accordance with GAAP accounting, we do not mark up the valuation of our partner companies until there is a validating event (such as an IPO or acquisition). The equity method of accounting may reduce the recorded value of our companies due to losses during their early stages. |
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