Room 4561
August 4, 2005
Bonnie L. Herron
Chief Financial Officer
Intelligent Systems Corporation
4355 Shackleford Road
Norcross, Georgia 30093
(770) 381-2900
Re: Intelligent Systems Corporation
Form 10-KSB for the fiscal year ended December 31, 2004
Filed March 30, 2005
Form 10-QSB for the quarter year ended March 31, 2005
Filed May 13, 2005
File No. 001-09330
Dear Mrs. Herron:
We have reviewed the above referenced filing and have the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the Fiscal Year Ended December 31, 2004
General
1. Based on the Company`s consolidated financial statements as of
the
quarterly period ended March 31, 2005, we note that a significant
portion of the Company`s assets are securities.1 In addition,
investing activities have generated significant income for the
Company. It appears that the Company may be an investment company
under section 3(a)(1)(A) or (C) of the Investment Company Act of
1940
(the "Company Act"). Section 3(a)(1) of the Company Act defines
an
investment company, in relevant part, as: any issuer which ? (A)
is
or holds itself out as being engaged primarily, or proposes to
engage
primarily, in the business of investing, reinvesting, or trading
in
securities . . . or (C) is engaged or proposes to engage in the
business of investing, reinvesting, owning, holding, or trading in
securities, and owns or proposes to acquire investment securities
having a value exceeding 40 per centum of the value of such
issuer`s
total assets (exclusive of Government securities and cash items)
on
an unconsolidated basis.2
Although we were able to examine the Company`s consolidated
financial
statements, we were unable to perform the analysis required under
section 3(a)(1)(C) of the Company Act. Please provide a written
response indicating whether the Company is an investment company
under section 3(a)(1) of the Company Act.
1 In the Company`s Form 10-KSB for the fiscal year ended
December
31, 2004, you state that "[f]requent acquisitions of or
investments
in early stage companies in the technology industry have long been
components of [your] overall strategy."
2 Section 2(a)(41) of the Company Act defines value, in
relevant
part, as, (1) with respect to securities owned at the end of the
last
preceding fiscal quarter for which market quotations are readily
available, the market value at the end of the quarter, and (2)
with
respect to other securities and assets owned at the end of the
last
preceding fiscal quarter, fair value at the end of the quarter, as
determined in good faith by the board of directors.
Section 3(a)(2) of the Company Act provides that the term
"investment securities" includes all securities except (a)
Government
securities, (b) securities issued by employees` securities
companies,
and (c) securities issued by majority-owned subsidiaries of the
owner
which (i) are not investment companies, and (ii) are not relying
on
the exception from the definition of investment company in
sections
3(c)(1) or 3(c)(7).
* * * * *
As appropriate, please amend your filing and respond to
these
comments within ten business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of
the
disclosure in the filing;
staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
the company may not assert staff comments as a defense in
any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
If you have any questions, please call Morgan Youngwood at
(202)
551-3479, Melissa Walsh at (202) 551-3224 or Stephen Krikorian at
(202) 551-3730.
Sincerely,
Stephen Krikorian
Accounting Branch Chief
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Bonnie L. Herron
Intelligent Systems Corporation
August 4, 2005
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