SEC Company Response from CoreCard Corp (CCRD) (CIK 0000320340) — Aug 26, 2005
CoreCard Corp (CCRD) (CIK 0000320340)
Date: Aug. 26, 2005 · CIK: 0000320340 · Accession: 0000950144-05-009134
AI Filing Summary & Sentiment
Letter
<PAGE> August 25, 2005 Mr. Stephen Krikorian Accounting Branch Chief Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549
Dear Mr. Krikorian:
This letter responds to your letter of August 4, 2005 commenting on the Forms 10-KSB for the fiscal year ended December 31, 2004 and 10-QSB for the quarter ended March 31, 2005 for Intelligent Systems Corporation (the "Company"). Specifically, you asked for our response indicating whether the company is an investment company under Section 3(a)(1) of the Investment Company Act of 1940 (the "1940 Act").
The Company is not an investment company within the meaning of the 1940 Act. It neither holds itself out in its public filings or otherwise as being engaged or proposing to engage in the business of investing, reinvesting or trading in securities within the meaning of paragraph (A) of Section 3(a)(1) nor invests or proposes to invest more than 40% of its assets in investment securities, within the meaning of paragraph (C) of that section. Rather, the Company, through its subsidiaries, is engaged in the business of designing, developing, selling and supporting products in two segments: Information Technology (mostly software) and Industrial Products. The Company makes controlled investments and acquisitions as part of its basic operating strategy. Reflected on the attached spreadsheet, only a small percentage of the Company's assets - well below the 40% threshold set forth in Section 3(a)(1)(C) - represents the ownership of "investment securities."
<PAGE>
Throughout its 30-year history, the Company has operated subsidiaries that typically are early and growth stage businesses, which the Company has either grown from start-up phase or acquired a majority of the voting securities. The common thread in the Company's efforts is bringing new technologies to business markets. Thus, a critical element of the Company's business model is being proactive in identifying emerging technologies, markets, companies, etc. In pursuing this model, the Company may on occasion initially be a minority owner in an enterprise, which may subsequently lead to our assuming a majority position if we determine that the entity or its technology fits our overall strategic direction. In any event, the Company has taken steps to ensure such minority positions do not cause it to become an investment company within the meaning of the 1940 Act.
The way our management functions reflects the nature of the Company's operations as that of an operating holding company rather than as a passive investor or investment manager buying and selling securities. Thus, Leland Strange, our CEO and a Managing Director of our CoreCard Software subsidiary, handles sales, business development and operational functions for CoreCard Software. Similarly, Francis Marks, one of our Vice Presidents, is President and CEO of our ChemFree subsidiary, and has full time, total operational responsibility for that $6 million company. And Bonnie Herron, CFO of our company, is also Secretary/Treasurer of several of our subsidiaries. In addition, her duties include accounting, human resources, contracting, real estate, and similar operational functions. None of these individuals, nor any other senior members of management is responsible for any investment management or securities trading function.
We would note further that the Company does not acquire publicly traded shares through market transactions. It may, however, from time to time own shares of publicly traded entities through mergers or sales of its non-public investments to such publicly-traded entities. Typically, the Company sells such securities when restrictions on resale expire and the market can support such a sale.
-2- <PAGE>
Finally, we would note that the Company has not made any new investments in other entities in the past two years, notwithstanding its active search for opportunities that complement its current subsidiaries' businesses and enhance shareholder value. Again, however, this long-term view is consistent with the reality of the Company's business model as an operator of subsidiary businesses, and in no sense the type of investor or trader of securities whose activities would cause it to be an investment company within the meaning of Section 3(a)(1)(A).
As requested in your letter of August 4, 2005, the Company acknowledges that (i) we are responsible for the adequacy and accuracy of the disclosure in our filing; (ii) 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 (iii) we 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.
We hope the foregoing is fully responsive to your question. If you need any additional information, please do not hesitate to contact the undersigned.
Sincerely,
Bonnie L. Herron
Chief Financial Officer
Show Raw Text
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<PAGE>
August 25, 2005
Mr. Stephen Krikorian
Accounting Branch Chief
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Mr. Krikorian:
This letter responds to your letter of August 4, 2005 commenting on the
Forms 10-KSB for the fiscal year ended December 31, 2004 and 10-QSB for the
quarter ended March 31, 2005 for Intelligent Systems Corporation (the
"Company"). Specifically, you asked for our response indicating whether the
company is an investment company under Section 3(a)(1) of the Investment Company
Act of 1940 (the "1940 Act").
The Company is not an investment company within the meaning of the 1940
Act. It neither holds itself out in its public filings or otherwise as being
engaged or proposing to engage in the business of investing, reinvesting or
trading in securities within the meaning of paragraph (A) of Section 3(a)(1) nor
invests or proposes to invest more than 40% of its assets in investment
securities, within the meaning of paragraph (C) of that section. Rather, the
Company, through its subsidiaries, is engaged in the business of designing,
developing, selling and supporting products in two segments: Information
Technology (mostly software) and Industrial Products. The Company makes
controlled investments and acquisitions as part of its basic operating strategy.
Reflected on the attached spreadsheet, only a small percentage of the Company's
assets - well below the 40% threshold set forth in Section 3(a)(1)(C) -
represents the ownership of "investment securities."
<PAGE>
Throughout its 30-year history, the Company has operated subsidiaries
that typically are early and growth stage businesses, which the Company has
either grown from start-up phase or acquired a majority of the voting
securities. The common thread in the Company's efforts is bringing new
technologies to business markets. Thus, a critical element of the Company's
business model is being proactive in identifying emerging technologies, markets,
companies, etc. In pursuing this model, the Company may on occasion initially be
a minority owner in an enterprise, which may subsequently lead to our assuming a
majority position if we determine that the entity or its technology fits our
overall strategic direction. In any event, the Company has taken steps to ensure
such minority positions do not cause it to become an investment company within
the meaning of the 1940 Act.
The way our management functions reflects the nature of the Company's
operations as that of an operating holding company rather than as a passive
investor or investment manager buying and selling securities. Thus, Leland
Strange, our CEO and a Managing Director of our CoreCard Software subsidiary,
handles sales, business development and operational functions for CoreCard
Software. Similarly, Francis Marks, one of our Vice Presidents, is President and
CEO of our ChemFree subsidiary, and has full time, total operational
responsibility for that $6 million company. And Bonnie Herron, CFO of our
company, is also Secretary/Treasurer of several of our subsidiaries. In
addition, her duties include accounting, human resources, contracting, real
estate, and similar operational functions. None of these individuals, nor any
other senior members of management is responsible for any investment management
or securities trading function.
We would note further that the Company does not acquire publicly traded
shares through market transactions. It may, however, from time to time own
shares of publicly traded entities through mergers or sales of its non-public
investments to such publicly-traded entities. Typically, the Company sells such
securities when restrictions on resale expire and the market can support such a
sale.
-2-
<PAGE>
Finally, we would note that the Company has not made any new
investments in other entities in the past two years, notwithstanding its active
search for opportunities that complement its current subsidiaries' businesses
and enhance shareholder value. Again, however, this long-term view is consistent
with the reality of the Company's business model as an operator of subsidiary
businesses, and in no sense the type of investor or trader of securities whose
activities would cause it to be an investment company within the meaning of
Section 3(a)(1)(A).
As requested in your letter of August 4, 2005, the Company acknowledges
that (i) we are responsible for the adequacy and accuracy of the disclosure in
our filing; (ii) 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 (iii) we 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.
We hope the foregoing is fully responsive to your question. If you need
any additional information, please do not hesitate to contact the undersigned.
Sincerely,
Bonnie L. Herron
Chief Financial Officer
Attachment
-3-
<PAGE>
INTELLIGENT SYSTEMS CORPORATION
INVESTMENT SECURITIES AND OTHER ASSET VALUES ON UNCONSOLIDATED BASIS
AS OF MARCH 31, 2005
<TABLE>
<CAPTION>
MARKET VALUE AS OF 3/31/05
-----------------------------------------------
ISC FAIR VALUE OF % OF TOTAL
OWNERSHIP MARKET SECURITIES ASSETS LESS
DESCRIPTION % VALUE BY TYPE CASH
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT IN PUBLIC SECURITIES
ANADigics NA 67,716
Subtotal of Public Securities 67,716A 0.18%
INVESTMENT IN SUBSIDIARIES (MAJORITY OWNED)
ChemFree 100.00% 6,300,367
QS Technologies 100.00% 4,000,000
VISaer 79.00% 13,746,000
CoreCard Software 87.00% 8,148,000
Subtotal of Subsidiaries' Securities 32,194,367 83.32%
INVESTMENT IN PRIVATE SECURITIES OF AFFILIATES
(25-49% OWNERSHIP)
NKD/CoreXpand 25.10% 841,881
Subtotal of Affiliate securities 841,881B 2.18%
INVESTMENTS IN PRIVATE SECURITIES (LESS THAN 20% OWNERSHIP)
Horizon Software 18.20% 3,250,000
Alliance 2.92% 456,672
Silverpop <1% 23,693
Screen Art 5.00% 37,500
Aderis <1% 276,570
LanCope 0.96% 243,258
Paymetric 1.50% 98,000
ISC Guernsey 19.00% 1,000,000
Subtotal of <20% owned securities 5,385,693C 13.94%
TOTAL - SECURITIES 38,489,657 38,489,657 99.61%
============================================
ISC other assets not in securities or cash 149,208 0.39%
ISC cash 531,944
----------- --------
TOTAL ASSETS - UNCONSOLIDATED BASIS 39,170,809
=========== =======
TOTAL ASSETS LESS CASH 38,638,865D 100.00%
Total Investment Securities (A+B+C) as
% of total securities less cash (D) 16%
</TABLE>
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