Intelligent Systems Corp: Material Undisclosed Related Party Transactions Cast Doubt on the Integrity of Financial Statements

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  • We believe that Intelligent Systems Corp. (INS) has its employees set up or take control of undisclosed shell companies in Asia, who then partake in undisclosed related party transactions with INS intended to either round-trip revenue back to INS or siphon money out of the company.
  • INS seems to make a concentrated and conscious effort to hide the related party nature of these transactions.
  • For example: INS invested into an unnamed Indian startup (which our research has uncovered as Flexopt Technologies), which later bought services from INS using INS’s own contributed capital.
  • One of INS’s employees was recently listed as the founder of Flexopt. This designation was later removed (we believe to cover their tracks). Another business partner associated with INS was also listed on the incorporation documents of Flexopt. None of this was disclosed to investors.
  • We have identified a network of Asian companies set up by INS’s employees or their business partners who commonly transact with each other, and sometimes with INS as well. We question the necessity and purpose of this network.
  • We have identified at least two other smaller instances of undisclosed related party transactions between INS and this Asian network.
  • We believe that these material undisclosed related party transactions cast doubt on the integrity of INS’s financial statements. Accordingly, we assign INS a price target of $5.

 

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