We are investigating Intelligent Systems Corporation (INS) (“Intelligent Systems”) for potential violations of the federal securities laws.
On May 23, 2019, post-market, MiMedx Group, Inc. (“MiMedx”) disclosed that an investigation conducted by its audit committee found that Parker H. Petit, a Director of Intelligent Systems and a member of Intelligent Systems’ Audit Committee, had engaged in accounting fraud during his tenure as Chief Executive Officer (“CEO”) of MiMedx. MiMedx stated, in part, that Petit’s misconduct included overseeing an internal investigation conducted for the purpose of discrediting whistleblowers who raised concerns about MiMedx’s practices, and that Petit’s behavior was so egregious that the possibility that he would be elected to MiMedx’s Board of Directors made it difficult for MiMedx to engage an independent auditor. On May 24, 2019, pre-market, Aurelius Value published a report entitled “INS: A Wolf in Pete’s Clothing.” The report discussed MiMedx’s disclosures concerning Petit, and also accused Intelligent Systems’ CEO, J. Leland Strange, of having engaged in undisclosed related-party transactions with Petit and others and of having an undisclosed personal relationship with Intelligent Systems’ auditor, Nicolas Cauley. On this news, Intelligent Systems’ stock price fell $4.18 per share, or 10.69%, to close at $34.93 per share on May 24, 2019. Then, on May 30, 2019, pre-market, Grizzly Research LLC issued a report entitled “Intelligent Systems Corp: Material Undisclosed Related Party Transactions Cast Doubt on the Integrity of Financial Statements.” The report presented evidence that Intelligent Systems “has its employees set up or take control of undisclosed shell companies in Asia, who then partake in undisclosed related party transactions with [Intelligent Systems] intended to either round-trip revenue back to [Intelligent Systems] or siphon money out of the company.” The report further stated that “there is a possibility that all revenue growth since January 2018 has been a result of undisclosed round-trip transactions with Indian related parties.” On this news, Intelligent Systems’ stock price fell $6.82 per share, or 20.17%, to close at $26.99 per share on May 30, 2019.